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Chapter 1

Financial Accounting: A Critical Approach 3e _ Chapter 1 Answers

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Department
Accounting
Course
ACC 110
Professor
Else Grech
Semester
Winter

Description
CHAPTER 1 The Accounting Environment: What Is Accounting and Why Is It Done? EXERCISES E1-1. This is a good critical thinking question. Many students will assume an answer and provide it. The key is understanding the factors that go into the choice that person is makingthe objectives she has in making the trip and the constraints she faces. The purpose of the question is to realize that solutions are context based. You really cant provide an answer that you can be sure is helpful until you ask some questions. Does she intend to drive, in which case she wants to know the best route for the trip? If so, does she prefer a scenic route or the route that will get her there in the shortest time, or the least distance? Other modes of transportation can be introduced (train, plane, bus, roller skates). The solution should consider constraints (does she have the money for a plane ticket, time for the scenic route, a drivers license if a drive is recommended). Many variations are possible, but the point is that no useful answer can be given without knowing more about the criteria she will apply in making the decision. E1-3. Various answers might be provided, but stakeholders would include students, faculty and staff, government agencies who provide funding, potential donors, alumni, and potential students. Studentspotential students want to know that they will obtain the best university experience for them. They may want to know whether the university has above average library or computing facilities. They may want to know the quality of the programs, the reputation of the faculty, the availability of fitness facilities, or even whether its a party school. Various sources of information could be consulted. University calendars, university fairs, discussions with current students, faculty, and alumni, and independent rankings may provide useful information. Faculty will want to know that the university is committed to excellence in teaching and research and will provide the needed resources, particularly for the programs they value. They will want to detect trends in funding of programs, resources for research and teaching or salaries. They will look at proposed budgets and hiring plans as well as financial statements of recent periods. Governments want to assess the financial needs of universities to determine their funding requirements. They will look to determine how past funding amounts have been used, projected enrollments and budgets and the participation of other sources of funding. Potential donors want to know that the money they give will be used for the purpose for which it is given. They will look for accountability for past donations, plans for the future, and the needs of the institution. Alumni might be interested in the perceived success or prestige of the university. E1-5. Copyright 2010 McGraw-Hill Ryerson Ltd. 1 John Friedlan, Financial Accounting: A Critical Approach, 3e www.notesolution.com
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