Stakeholders Who Use Accounting Information Include ______.
Question: Explain the term stakeholder. Distinguish between stakeholders with a direct versus an indirect interest in the companies that issue financial reports.
Answer:
Question: Why is accounting called the language of business?
Answer: Accounting provides information that is useful in making decisions by all participants in the market for resource goods and services, both profit-oriented and nonprofit oriented. Because accounting’s role is so important, it is often called the language of business.
Question: What is the primary mechanism used to allocate resources in the United States?
Answer: Competition for resources in the open market
Question: In a business context, what does the term market mean?
Answer: A market is a group of people or organizations that come together for the purpose of exchanging items of value.
Question: What market trilogy components are involved in the process of transforming resources into
finished products?
Answer: The market for business resources involves three distinct participants: consumers, conversion agents, and resource owners.
Question: Give an example of a financial resource, a physical resource, and a labor resource.
Answer: Financial Resource: money
Physical Resource: natural resources, buildings, machinery and equipment, furniture and fixtures.
Labor Resource: includes both intellectual and physical labor; i.e. employees
Question: What type of income or profit does an investor expect to receive in exchange for providing
financial resources to a business? What type of income does a creditor expect from providing
financial resources to an organization or business?
Answer: Investors expect a distribution of the business’s profits as a return on their financial investment (capital allocation).
Creditors lend financial resources to businesses and receive interest as a return or profit on the loan.
Question: How do financial and managerial accounting differ?
Answer: Financial accounting provides information that is useful to external resource providers.
Managerial accounting provides information that is useful to managers in operating an organization (i.e., internal users).
Question: Describe a not-for-profit or nonprofit enterprise. What is the motivation for this type of entity?
Answer: Not-for-profit or nonprofit entities provide goods or services to consumers for humanitarian or special reasons rather than to earn a profit for owners.
Question: What are the U.S. rules of accounting information measurement called?
Answer: generally accepted accounting principles (GAAP)