Question

Question 1: a) Explai ur undesianding about (2m) accounting b) Explain TWO (3) purposes of accounting information. e) What is the purpose of preparation Statement of Profit or Loss (3m) and Statement of Financial Position by the company (3m)

Answer 1

Answers

• Answer ‘a’

--Accounting can be defined as a process of recording financing transaction to ascertain where the business is going on ‘financially’.

--It’s a measure of business operation’s success.
--Transactions are recorded and financial statements are prepared based on those accounted record.
--Accounting can be termed as ‘business’ language.

• Answer ‘b’

Two purposes of accounting information:
--Business transactions gets recorded and accounted for, which would otherwise would have been forgotten or missed.
--purpose of accounting information is to figure out whats the Net Income or Net Loss.
--another purpose is to get a glance over the financial position of business, like how much assets the business has to settle of its liabilities and obligations.

• Answer ‘c’

Purpose of preparation of Statement of Profit or Loss include:
--finding out Gross profits
--Operating income or loss
--Net Income or Net Loss

Purpose of Statement of Financial position include:
--to know the amount of assets, liabilities and equities.
--to calculate various ratios and conduct ratio analysis.
--to compare results with previous year performances.