FABM LESSON 1

• What is accounting defined as by the Financial Accounting Standards Board?

  Information system measuring financial information
• What is the main purpose of accounting?

  To enable users to make decisions
• How does the American Accounting Association define accounting?

  Process of identifying, measuring, and communicating
• What does the Accounting Standard Council state about accounting?

  It is a service activity providing quantitative information
• What is the definition of accounting according to AICPA?

  Art of recording, classifying, and summarizing
• What is the nature of accounting as described in the material?

  It provides information about economic activities
• What are the inherent features of accounting?

  • Dynamic subject adapting to socio-economic changes
  • Science based on fundamental principles
  • Information system for measuring economic activities
  • Art requiring knowledge and experience
  • Means to provide a true financial view
  • Language of business for communication
  • Profession requiring specific qualifications
• What does it mean that accounting is a science?

  It is based on fundamental principles
• Why is accounting considered an information system?

  It processes and communicates financial reports
• How is accounting described as an art?

  It requires knowledge, interest, and experience
• What does it mean that accounting is a means, not an end?

  It provides a true view of financial performance
• Why is accounting referred to as the language of business?

  It communicates business events through financial statements
• What is the significance of debits and credits in accounting?

  They are symbols unique to accounting discipline
• Who is known as the Father of Accounting?

  Luca Pacioli
• What system did Luca Pacioli describe?

  Double entry system of debits and credits
• What are the seven key ingredients of accounting?

  1. Private Property
  2. Capital
  3. Commerce
  4. Credit
  5. Writing
  6. Money
  7. Arithmetic
• Why is private property important in accounting?

  Ownership of assets needs transaction recording
• How does capital relate to accounting?

  It makes recording transactions worthwhile
• Why is commerce a key ingredient in accounting?

  It necessitates a formally organized accounting system
• What role does credit play in accounting?

  It creates the need for recording credit transactions
• Why is writing essential in accounting?

  Transactions must be recorded in writing
• What is the importance of money in accounting?

  It serves as a common denominator for transactions
• Why is arithmetic necessary in accounting?

  Calculations are needed in a formal system
• What accounting system was preferred in the 19th century?

  Double-entry system for better control
• How did accounting records change in Colonial America?

  Expanded to include preparation and analysis of statements
• What impact did the Industrialized World have on accounting?

  Transactions became more complex, requiring reliable records
• What agency sets accounting standards in the 21st century?

  Securities and Exchange Commission
• What significant act was passed after the 2008 financial crisis?

  Dodd-Frank Wall Street Reform Act
• Who wrote the first electronic spreadsheet?

  Dan Brinklin and Bob Frankson
• What was the significance of VisiCalc?

  It was the first electronic spreadsheet for PCs