Tenika S 6.01 Show Me the Money - Questions PDF

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6.01 Show Me the Money - Nature of Accounting

Name: Tenika Smith

Date: 12/13 Directions: Read 6.01 Show Me the Money - Nature of Accounting (LAP-FI-005C-CS). After you are finished reading this article, please complete the accompanying questions in RED using your own words. Make sure your words align with what you just read. Save file as a PDF file and then upload to Canvas. 1. What is accounting? A business activity that involves keeping financial records 2. Why is accounting important to businesses? It keeps track of finances 3. Explain each of the following ways that accounting information is used to maintain financial control: a. Tracking the business’s performance- More money mean good sales,Less money means no sales b. Planning for the future- If they want to expand, they’ll need an certain amount of money and they have to make sure they have that amount of money 4. Explain how each of the following groups makes use of a business’s accounting information: a. Managers- Primary Users b. Investors- check it before buying stock c. Creditors- examine an business accounting info before letting them get an loan d. The government- they do it all 6. What is an accounting system? a consistently applied process for handling its financial information. 7. Explain the five characteristics that are common to all effective accounting systems. 1. easy to use 2. processes data quickly 3. expandable 4. affordable to operate 5. protects the business 8. What are the steps of the accounting cycle? • Analyzing financial transactions. • Journalizing transactions • Posting to ledgers. *• Balancing the books • Preparing financial statements. ● Closing the books 9. Explain the difference between the cash accounting method and the accrual accounting method. Cash accounting is when it’s recorded once the money changes hands,accrual is when its recorded once it occurs even if no money was traded. 10. What is the purpose of accounting standards? SO that businesses don’t mess up their money 11. What is the purpose of each of the following financial statements: a. Balance sheet- c aptures the business’s financial condition at a particular moment b. Income statement- h  ow much money the business has made or lost during a specific period of time, usually one year c. Cash flow statement- a financial summary estimating when, where, and how much money will flow into and out of a business during a specific period of time...