Solution Manual for Accounting Principles, 9th Edition

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Weygandt,Accounting Principles,9/e, Solutions Manual(ForUse Only)1-1CHAPTER 1Accounting in ActionANSWERS TO QUESTIONS1.Yes, this is correct. Virtually every organization and person in our society uses accountinginformation. Businesses, investors, creditors, government agencies, and not-for-profit organizationsmust use accounting information to operate effectively.2.Accounting is the process of identifying, recording, and communicating the economic events ofan organization to interested users of the information. The first step of the accounting process istherefore to identify economic events that are relevant to a particular business. Once identifiedand measured, the events are recorded to provide a history of the financial activities of theorganization. Recording consists of keeping a chronological diary of these measured events in anorderly and systematic manner. The information is communicated through the preparation anddistribution of accounting reports, the most common of which are called financial statements.A vital element in the communication process is the accountant’s ability and responsibility toanalyze and interpret the reported information.3.(a)Internal users are those who plan, organize, and run the business and therefore are officersand other decision makers.(b)To assist management, managerial accounting provides internal reports. Examples includefinancialcomparisonsofoperatingalternatives,projectionsofincomefromnewsalescampaigns, and forecasts of cash needs for the next year.4.(a)Investors (owners) use accounting information to make decisions to buy, hold, or sell owner-ship shares of a company.(b)Creditors use accounting information to evaluate the risks of granting credit or lending money.5.Bookkeeping usually involves only the recording of economic events and therefore is just one partof the entire accounting process. Accounting, on the other hand, involves the entire process ofidentifying, recording, and communicating economic events.6.Karen Sommers Travel Agency should report the land at $90,000 on its December 31, 2010balance sheet. An important concept that accountants follow is the cost principle. The costprinciple states that assets should be recorded at their cost. Cost has an important advantageover other valuations: it is reliable. Cost can be objectively measured and can be verified.7.The monetary unit assumption requires that only transaction data that can be expressed in termsof money be included in the accounting records. This assumption enables accounting to quantify(measure) economic events.8.The economic entity assumption requires that the activities of the entity be kept separate anddistinct from the activities of its owners and all other economic entities.

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