Sharmori Richardson

Intro to Business
Chapter 15 Homework
1. Who are the users of accounting information and for what purposes do they use it for?
a) The users for accounting information and the purpose they use it for is as follow:
I. Business managers- they use accounting information to develop goals and plans, set
budgets, and evaluate future prospects.
II. Employees and unions- they use it to plan for and receive compensation and such
benefits such as health care, vacation time and retirement pay.
III. Investors and creditors- they use it to estimate returns to stockholders, determine
growth prospects and decide whether a firm is good credit risk.
IV. Tax authorities- the use it to plan for tax inflows, determine the tax liabilities of
individuals and businesses, and ensure that correct amounts are paid on time.
V. Government regulatory agencies- the rely on accounting information to fulfill their
duties towards the public.
2. Identify the three types of services perform by CPAs.
a) The three types of services perform by CPAs are:
Auditing
Tax Services; and
Management Advisory Services
3. Explain the ways in which financial accounting differs from managerial accounting.
a) The difference between financial and managerial accounting is that financial is concerned
with external information users while managerial accounting deals with internal users.
Another difference is that financial accounting focuses on the activities of the company as
whole rather than on individual departments or divisions like managerial accounting.
4. Discuss the activities and services performed by forensic accountants.
a) The activities forensic accountants take part in are Investigative accounting and
Litigation accounting. Investigative accounting involves the process of identifying and
analyzing pertinent financial evidence such as documents, bank accounts, phone
numbers, computer records and people. After they analyze the evidence they present
accounting conclusions and their legal implications. Litigation accounting involves

assisting in the application of accounting evidence for judicial proceedings by preparing

and preserving evidence for these proceedings. It also involves presenting visual aids to
support trial evidence, by any case in the court.
b) Certified Fraud Examiners take part in services such as:
I. Fraud prevention and deterrence- this includes why people commit fraud, theories of
fraud prevention and professional codes.
II. Financial transactions- this includes the examination of different types of fraudulent
financial transactions that incurred in accounting records.
III. Fraud investigation- This pertains to tracing illicit transactions, evaluating deception, and
interviewing and taking statements.
IV. Legal elements of fraud- this includes rules of evidence, criminal and civil law and rights
of the accused and accuser.
5. Interview an accountant at a local business, nonprofit organization, or government entity.
How does the firm use budgets? How does budgeting help managers plan business
activities? How does budgeting help them control activities? Give examples.
I interviewed Senior Accountant of Grant Thornton, Mr. Chad Smith. In regards to this question
Chad said that firms use budgets on every file to monitor profitability. For example, an
accountant analyzing the expenses for the Taste of Cayman event that will take place next
January. It allows management to analyze and allocate workloads efficiently for their staff. For
example, assigning the employees of CITA to different tasks in order to make sure the event runs
smoothly. Budgets are also used to determine staff performances and if a client should be billed
addition based on the hours needed to finish the job.
Chapter 16 Homework
1. Explain the four characteristics of money.
a) The four characteristics of money are:
Portability- This means that the currency is light and easy to handle.
Divisibility- This means that money is easily divisible into smaller parts with fixed
values.

Durability- This means that money never dies nor spoils. If it wears out, it can be

replaced. Also it is very hard to counterfeit.

Stability- This means that the value of paper money will fluctuate, but it is considered

more stable and predictable.

2. What are the components of M-1 and M-2?
a) M-1 is the measure of money supply that includes only the most liquid forms of money. This
includes currency (cash), checks and checking accounts or demand deposits.
b) M-2 is the measure of money supply that includes all the components of M-1 plus the forms
of money that can be easily converted into spendable forms. This includes time deposits,
money market mutual funds, saving accounts and the components of M-1.