1. Distinguish between management accounting and financial accounting.

2. Discuss briefly the basic accounting concepts and fundamental Accounting

assumptions.
Accounting, as an information system is the process of identifying, measuring and communicating the
economic information of an organization to its users who need the information for decision making. It
identifies transactions and events of a specific entity. A transaction is an exchange in which each
participant receives or sacrifices value (e.g. purchase of raw material). An event (whether internal or
external) is a happening of consequence to an entity (e.g. use of raw material for production). An
entity means an economic unit that performs economic activities.
Or
the art of recording, classifying and summarizing in a significant manner and in terms of money,
transactions and events, which are, in part at least, of a financial character and interpreting the
results thereof
Objective of Accounting:
i) To keeping systematic record:
ii) To ascertain the results of the operation:
iii) To ascertain the financial position of the business:
iv) To portray the liquidity position:
v) To protect business properties
vi) To facilitate rational decision making:
vii) To satisfy the requirements of law:
Functions of Accounting
i) Record Keeping Function:
ii) Managerial Function:
iii) Legal Requirement function:
iv) Language of Business:
Methods of Accounting
Business transactions are recorded in two different ways.
I) Single Entry
II) Double Entry
Types of Accounting:
The object of book-keeping is to keep a complete record of all the transactions that place in the
business. To achieve this object, business transactions have been into three categories:
(i) Transactions relating to persons.
(ii) Transactions relating to properties and assets
(iii) Transactions relating to incomes and expenses.




BRANCHES OF ACCOUNTING
The changing business scenario over the centuries gave rise to specialized branches of accounting
which could cater to the changing requirements. The branches of accounting are;
i) Financial accounting;
ii) Cost accounting; and
iii) Management accounting.

Assumptions
The four main assumptions accountants use are: A company is an entirely separate entity; a company
is a going concern; a company's assets and liabilities are valued in a consistent unit of currency; and
a company's lifespan can be split into equal accounting periods.

3. Journalize the following transactions for the month of December 2010. Also state the
nature of each account involved in the journal entry.

4 A) What is meant by Replacement cost?

Replacement cost is the price that an entity would pay to replace an existing asset at current market
prices with a similar asset. If the asset in question has been damaged, then the replacement cost
relates to the pre-damaged condition of the asset.
The replacement cost of an asset may vary from the market value of that specific asset, since the
asset that would actually replace it may have a different cost; the replacement asset only has to
perform the same functions as the original asset - it does not have to be an exact copy of the original
asset.
Replacement cost is a common term used in insurance policies to cover damage to a company's
assets.




b) Explain provisions and reserves?