1.1 Understanding the purpose of accounting

• Audit and assurance ensures the credibility of financial information.

  True
• The function of audit and assurance involves reviewing financial records for compliance
• What are the primary functions of an accountant in business?

  Financial reporting, management accounting, audit and assurance, tax planning
• Financial reporting provides external stakeholders with reliable financial information.


  True
• The purpose of financial accounting is to prepare financial statements that give a true and fair view of a company's financial position
• An income statement reports a company's revenues, expenses, and net profit or loss over a period of time.


  True
• What does a balance sheet provide a snapshot of?

  Assets, liabilities, and equity
• A cash flow statement categorizes cash flows into operating, investing, and financing activities.

  True
• The purpose of financial accounting is to prepare financial statements that give a true and fair view
• Match the accounting function with its primary responsibility:

  Financial Reporting ↔️ Preparing financial statements

  Management Accounting ↔️ Creating internal reports

  Audit and Assurance ↔️ Reviewing financial records

  Tax Planning ↔️ Managing tax obligations
• Management accounting creates internal reports for budgeting, performance analysis, and cost control
• What is one key function of accounting related to budgeting and cost control?

  Management accounting
• Match the stakeholder with their purpose of using accounting information:

  Investors ↔️ Investment decisions

  Creditors ↔️ Evaluate loan risk

  Management ↔️ Strategic planning

  Government Agencies ↔️ Ensure compliance
• Performance analysis in management accounting helps identify areas for improvement.

  True
• What is the role of an accountant in business?

  Preparing and analyzing financial statements
• Preparing balance sheets, income statements, and cash flow statements is part of the function of financial
• What is the significance of financial reporting in accounting?

  Provides reliable information for stakeholders
• Management accounting creates internal reports for budgeting and cost control.

  True
• Creating internal reports for budgeting and cost control is part of the function of management
• Who are the key stakeholders who use accounting information?

  Investors, creditors, management, employees
• What does a balance sheet provide information about?

  Assets, liabilities, and equity
• What does a cash flow statement categorize cash flows into?

  Operating, investing, and financing
• The income statement reports a company's revenues, expenses, and net profit or loss
• What is the main purpose of financial statements for external stakeholders?

  Informed decision-making
• A balance sheet shows a company's financial position at a specific point in time.


  True
• What does tax planning aim to reduce for a business?

  Tax liabilities
• Audit and assurance ensure the credibility of financial information.


  True
• Investors use accounting information to assess a company's financial performance
• What is one key responsibility of management accounting?

  Budgeting