Accounting and the Business Environment pot

Accounting and the Business Environment Chapter 1 Objective 1 Use accounting vocabulary is an information system that measures business activities, processes information, and communicates financial information. Accounting is called the language of business. Accounting External users make decisions about the entity. Internal users make decisions for the entity. Users of Accounting Information Management Accounting Financial Accounting Fields of Accounting Public Sector (SEC) Private Sector (FASB) Private Sector (AICPA) (IMA) GAAP The Authority Underlying Accounting AICPA’s Code of Professional Conduct Standards of Ethical Conduct of the Institute of Management Accountants Standards of Professional Conduct Proprietorships Partnerships Corporations Types of Business Organizations Proprietorships ✔ What are some advantages? – total undivided authority – no restrictions on type of business – must be legal ✔ What are some disadvantages? – unlimited liability – limitation on size – fund raising power [...]... taxation – extensive governmental regulation Objective 2 Apply Accounting Concepts and Principles Generally Accepted Accounting Principles What is the primary objective of financial reporting? To provide information useful for making investment and lending decisions The Entity Concept Example Assume that John decides to open up a gas station and coffee shop The gas station made $250,000 in profits, while... in 30 days 4 She earns and collects $5,500 revenues Accounting for Business Transactions 5 Gillen performs services, and the client agrees to pay $3,000 within one month 6 During the month, she pays $3,300 for expenses incurred 7 Gillen pays $300 to the store from which she purchased $500 worth of supplies What is the effect of these transactions on the accounting equation? Accounting for Business... paid later for costs that have been incurred to earn revenue – salaries and wages – utilities – supplies used – advertising Objective 4 Analyze Business Transactions Accounting for Business Transactions What is a transaction? It is any event that both affects the financial position of the business and can be reliably recorded Accounting for Business Transactions 1 Gay Gillen invests $30,000 to begin... at similar conclusions using same data The Cost Principle Assets and services acquired should be recorded at their actual cost The Going Concern Concept The entity will continue to operate in the future The Stable-Monetary-Unit Concept The dollar’s purchasing power is relatively stable Objective 3 Use the Accounting Equation The Accounting Equation Assets Economic Resources = Liabilities + Owner’s... equation? Accounting for Business Transactions Owner’s Assets = Liabilities + Equity 1) Cash 2) Cash Land 3) Supplies 4) Cash 5) Receivable 6) Cash 7) Cash Totals + $30,000 – 20,000 + 20,000 + 500 + 5,500 + 3,000 – 3,300 – 300 + $35,400 + $30,000 + 500 + + – – 300 + 200 5,500 3,000 3,300 + $35,200 Accounting for Business Transactions Notice that the equation always stays in balance Each transaction... affects at least two accounts, sometimes more Some transactions affect only one side of the equation; some affect both sides Accounting for Business Transactions Other transactions that took place were as follows: The business collected $1,000 from the client She sold some land at cost for $9,000 She withdrew $2,000 from the business ...Partnerships What are some advantages? better credit standing – possibly – more brain power, but consultation with partners required What are some disadvantages? – unlimited personal liability for general partners – need for written partnership agreement Corporations... The Accounting Equation Assets Economic Resources = Liabilities + Owner’s Equity Claims to Economic Resources Assets What is an asset? It is something a company owns which has future economic value – land – building – equipment – goodwill Liability What is a liability? It is something a company owes – money – service – legal retainers – product – magazines Owner’s Equity What is owner’s equity? It is . Accounting and the Business Environment Chapter 1 Objective 1 Use accounting vocabulary is an information system that measures business activities, processes information, and communicates. Information Management Accounting Financial Accounting Fields of Accounting Public Sector (SEC) Private Sector (FASB) Private Sector (AICPA) (IMA) GAAP The Authority Underlying Accounting AICPA’s. regulation Objective 2 Apply Accounting Concepts and Principles To provide information useful for making investment and lending decisions Generally Accepted Accounting Principles ✔ What is