CHAPTER 1
INTRODUCTION TO
ACCOUNTING
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LEARNING OBJECTIVE 1
DESCRIBE THE PURPOSE OF
ACCOUNTING.
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THE PURPOSE OF ACCOUNTING
TO PROVIDE:
FINANCIAL INFORMATION ABOUT
THE CURRENT OPERATIONS AND
FINANCIAL CONDITION OF A
BUSINESS TO INDIVIDUALS AND
ORGANIZATIONS
Keep track of and present financial
info $$$$$$$$
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WHO ARE THE USERS OF ACCOUNTING INFORMATION?
Anyone who cares about keeping track
of $
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LEARNING OBJECTIVE 2
DESCRIBE THE ACCOUNTING PROCESS.
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THE ACCOUNTING PROCESS
ACCOUNTING IS A SYSTEM OF:
GATHERING FINANCIAL INFORMATION
ABOUT A BUSINESS AND REPORTING
THIS INFORMATION TO USERS
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STEP ONE
ANALYZING
LOOKING AT EVENTS THAT HAVE
TAKEN PLACE AND THINKING
ABOUT HOW THEY AFFECT THE
BUSINESS
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STEP TWO
RECORDING
ENTERING FINANCIAL
INFORMATION ABOUT
EVENTS INTO THE
ACCOUNTING SYSTEM
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STEP THREE
CLASSIFYING
SORTING AND GROUPING
SIMILAR ITEMS TOGETHER
RATHER THAN MERELY
KEEPING A SIMPLE, DIARYLIKE RECORD OF NUMEROUS
EVENTS
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STEP FOUR
SUMMARIZING
THE AGGREGATION OF MANY
SIMILAR EVENTS TO
PROVIDE INFORMATION
THAT IS EASY TO
UNDERSTAND
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STEP FIVE
REPORTING
TELLING THE RESULTS
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STEP SIX
INTERPRETING
DECIDING THE MEANING AND
IMPORTANCE OF THE
INFORMATION IN VARIOUS
REPORTS
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THE ACCOUNTING PROCESS: SIX MAJOR STEPS
ANALYZING
RECORDING
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THE ACCOUNTING PROCESS: SIX MAJOR STEPS
CLASSIFYING
SUMMARIZING
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THE ACCOUNTING PROCESS: SIX MAJOR STEPS
REPORTING
INTERPRETING
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LEARNING OBJECTIVE 3
DEFINE GAAP AND DESCRIBE THE
PROCESS USED BY FASB TO DEVELOP
THESE PRINCIPLES.
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GAAP
GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
DEVELOPED BY THE FINANCIAL
ACCOUNTING STANDARDS BOARD
(FASB)
PROCEDURES AND GUIDELINES TO BE
FOLLOWED IN THE ACCOUNTING AND
REPORTING PROCESS
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LEARNING OBJECTIVE 4
DEFINE THREE TYPES OF BUSINESS
OWNERSHIP STRUCTURES.
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THREE TYPES OF OWNERSHIP STRUCTURES
SOLE PROPRIETORSHIP
PARTNERSHIP
CORPORATION
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SOLE PROPRIETORSHIP
ONE OWNER
OWNER ASSUMES ALL RISK
OWNER MAKES ALL DECISIONS
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PARTNERSHIP
TWO OR MORE PARTNERS
PARTNERS SHARE RISKS
PARTNERS MAY DISAGREE ON HOW
TO RUN THE BUSINESS
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CORPORATION
STOCKHOLDERS
STOCKHOLDERS HAVE LIMITED RISK
STOCKHOLDERS MAY HAVE LITTLE
INFLUENCE ON BUSINESS DECISIONS
http://www.citmedialaw.org/legalguide/forming-corporation-california
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LEARNING OBJECTIVE 5
CLASSIFY DIFFERENT TYPES OF
BUSINESSES BY ACTIVITIES.
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TYPES OF BUSINESSES
SERVICE BUSINESS
MERCHANDISING BUSINESS
MANUFACTURING BUSINESS
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SERVICE BUSINESS
A BUSINESS THAT PROVIDES A SERVICE
TRAVEL
AGENCY
PHYSICIAN
COMPUTER
CONSULTANT
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MERCHANDISING BUSINESS
A BUSINESS THAT BUYS A PRODUCT FROM
ANOTHER BUSINESS TO SELL TO CUSTOMERS
PHARMACY
DEPARTMENT
STORE
JEWELRY
STORE
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MANUFACTURING BUSINESS
A BUSINESS THAT
MAKES A PRODUCT TO SELL
FURNITURE
MAKER
AUTOMOBILE
MANUFACTURER
TOY
FACTORY
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