[经济学]A Solutions Manual for Peter Carey 1 feb 2010-1.doc

Chapter 1 Accounting in Action ANSWERS TO QUESTIONS 1. Yes, this is correct. Virtually every organisation and person in our society uses accounting information. Businesses, investors, creditors, government agencies, and not-for-profit organisations must use accounting information to operate effectively. We can group these users into 2 types: internal and external users—Internal users who include managers require specific information about the day to day operations of the organization whilst external users who include shareholders, banks, creditors, regulators require less detailed financial information which focuses on their specific needs. 2. Accounting is the process of identifying, recording, and communicating the economic events of an entity to interested users of the information. The first step of the accounting process is therefore to identify events that are: (a) considered evidence of economic activity and (b) relevant to a particular business entity. Once identified and measured, the events are recorded to provide a permanent history of the financial activities of the entity. Recording consists of keeping a chronological diary of these measured events in an orderly and systematic manner. The information is communicated through the preparation and distribution of accounting reports, the most common of which are called financial reports. A vital element in the communication process is the accountant’s ability and responsibility to analyse and interpret the reported information. 3. (a) Internal users are those who manage the business and therefore are officers and other decision makers. (b) To assist management, accounting provides internal reports. Examples include financial comparisons of operating alternatives, projections of income from new sales campaigns, and forecasts of cash needs for the next year. 4. (a) Investors (owners) use accounting information to make decisions to buy, hold or sell shares. (b) Creditors use accounting information to