Jill Wants to Start Her Own Business,but Knows Little About

question 57

Multiple Choice

Jill wants to start her own business,but knows little about how to set up an accounting system or interpret financial information."I'm not worried about accounting," she tells her friends."I'll just hire a part-time bookkeeper to handle all that type of stuff,and focus my attention on what I like-finding ways to satisfy my customers." Which of the following is the best response to Jill's comments?

• A)Jill has a good plan.Only managers of large firms require knowledge of accounting.Owners and managers of small businesses can easily get away with just a part-time bookkeeper.
• B)Although Jill can hire someone for bookkeeping,she'll still need to know how to read,understand,and interpret basic accounting reports in order to make good business decisions.
• C)Jill should make sure the bookkeeper she hires knows how to use a database,since this type of software is the heart of any efficient accounting system.
• D)Most entrepreneurs would agree with Jill's opinion.The work done by accountants is mainly clerical in nature,so time spent by business owners on accounting tends to take them away from more important tasks.

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Definitions:

Pushdown Accounting

The method of accounting for acquisitions where the purchase price of a subsidiary is reflected at fair value on the subsidiary's financial statements, rather than the parent company's.

Acquisition

The process or action in which one company purchases most or all of another company's shares or assets, effectively gaining control over the acquired company.

Consolidated Financial Statements

Financial statements that present the assets, liabilities, and operating results of a parent company and its subsidiaries as if the group were a single entity.

Ownership Percentage

The share of a company or property owned by an individual or entity, often expressed as a portion of 100%.