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Midterm

ACC 100 Study Guide - Midterm Guide: Financial Statement


Department
Accounting
Course Code
ACC 100
Professor
Else Grech
Study Guide
Midterm

Page:
of 2
1. Why is an accounting system important to external stakeholders? (HINT:
define an accounting system first before you consider why it is important to
external stakeholders!)
Companies record their business transactions in an accounting system: an
information system that collects, groups, and communicates a business's
financial position, including its financial health and profitability.
Without accounting information, stakeholders would not be able to make many
of the decisions that help them meet their objectives.
External stakeholders do not have access to the business's accounting system
because they are outside of the business.
Instead, they depend on the financial statements that businesses produce.
Financial statements tell a business's story, what they do and how well they do it.
They provide a business’s financial performance, its current financial position,
and its cash flows.
External stakeholders use the financial statements to analyze a business and
answer questions, which allows them to make decisions and meet their
objectives.
2. Why is it important to review your financial statements regularly, even if you
run your own business?
In order to make good business decisions all stakeholders need to have a
good idea of how the business has progressed in the past.
By reviewing ALL the financial statements and analyzing them the
stakeholders can answer the questions they have (see Chapter 1) so as to
make better business decisions.
This is particularly important for owners of a business as they need to
make decisions that affect the business on a daily basis.
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Accounting information, summarized in the financial statements, can be
used to help make those decisions.
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find more resources at oneclass.com