Master of Business Administration

Lahore Business School

(Test Assignment - I)
Financial Accounting
Course Code: ACC01303

Submitted To: Sir Faisal Mahmood

Submitted By: Mubashar Iftikhar

Semester: Fall-18
Reg. #: MBA2Y02183005
Submitted On: 21-Dec-2018
Q1: Explain the financial accounting.
Answer:
Financial accounting refers to information describing the financial resources, obligations,
and activities of an economic entity (either an organization or an individual). Accountants use the
term financial position to describe an entity’s financial resources and obligations at a point in time
and the term results of operations to describe its financial activities during the year.
Financial accounting information is designed primarily to assist investors and creditors in
deciding where to place their scarce investment resources. Such decisions are important to society,
because they determine which companies and industries will receive the financial resources
necessary for growth. When capital, which is a scarce resource, is allocated wisely, the overall
prosperity of society is maximized (refer to Exhibit 1–1, the Pathways Model of accounting).
Financial accounting information also is used by managers and in income tax returns. In
fact, financial accounting information is used for so many different purposes that it often is called
“general-purpose” accounting information.

Q2: Why a business graduate need to study financial accounting?

Answer:
Being a business graduate the study of financial accounting will help you learn how
business transactions are actually recorded, how they move through an accounting system, and
how they eventually lead to the preparation of financial statements. The foundation you have
received will be helpful to you as we move into a more sophisticated discussion of business
transactions and how they impact a company’s financial position, results of operations, and cash
flows.