Answers to Questions 1) Financial accounting is the communication of information about a business or other type of organization (such as a charity or government) so that individuals and any other interested groups can evaluate its financial health and future prospects. Financial accounting provides data needed by decision makers to arrive at wise decisions about an organization as a whole 2) Financial accounting information is used to assess the financial health and future prospects of an organization. Therefore, this information is often analyzed by investors as part of the process of deciding whether to buy (or possibly sell) the capital (ownership) shares of a business. Strong financial results often lead to an increase in the market price of such shares and additional dividend distributions. Financial accounting information can also help determine whether an organization deserves to receive a loan or other forms of credit. If cash inflows seem adequate, a bank or creditor can hope to receive repayment of a loan or liability when due plus a reasonable rate of interest. Financial accounting helps such lenders judge the risk they are taking. 3) Financial accounting encompasses all steps in the process of providing information to those outside of an organization so that they can make decisions about that entity when viewed as a whole. Financial accounting decisions are rather limited – should capital shares be bought or sold and should a loan or other credit be extended? Managerial accounting provides information for those inside of an organization so that they can make decisions on behalf of that organization. There are hundreds, if not thousands, of decisions that can be made using managerial accounting information. Should a new truck be bought with cash or by taking out a loan? Should employee pay raises this year be 3 percent or 4 percent? Should a new computer system be acquired immediately or in two years? 4) Possible users of financial accounting information include potential and current shareholders, potential and current lenders and creditors, potential and current employees of the organization, governments, customers, contractors, and suppliers. 5) Ligando and Zvyvco have been told that they should incorporate their new business. They need to understand the ramifications of that decision so they can make it appropriately. A corporation is a business or other organization th