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CHAPTER 1
QUESTIONS
1. The users of accounting information can be divided into two groups: internal users, who make decisions directly affecting the internal operations of an enterprise, and external users, who use the information to make decisions concerning their relationships with the enterprise. Members of the latter group include creditors, investors, government, and the general public. Both types of users benefit by receiving information needed to make economic decisions. Generally, accounting information is used to help make decisions that affect the allocation of scarce resources, including labor, materials, and capital.
2. Because almost all resources used in the world are limited in quantity, these re-sources must be allocated to specific activities. Accounting information can be used to determine the profitability of activities relative to the using up of resources. By structuring the accounting information in different ways, measureme

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