Introduction to Accounting &
Business
Chapter 1
Business
An organization in which basic
resources such as materials and labor
are assembled and processed to provide
goods and services to customers
Profit – difference between the amount
received from customers and amounts
paid for inputs
Goal of business
Types of Business
Merchandising
Sell products to
customers
Retail
Food
Gasoline
Type of Business
Manufacturing
Change basic inputs into products that are
sold to individual customers
Type of Business
Service
Provide services rather than products to
customers
Types of Business Organization
Proprietorship
Is owned by one
individual
Partnership
Is owned by two or
more individuals
Corporations
Is organized under
state or federal
statutes as a
separate legal entity
Sells shares of stock
Obtain large
amounts of capital
Business Stakeholders
Is a person or entity that has an
interest in the economic performance of
the business
Owners
Managers
Employees
Customers, government, and creditors
Role of Accounting
An information system that provides reports
to stakeholders about the economic activities
and condition of a business
Process
Identify stakeholders
Assess stakeholders
Design the system
Record economic data
Prepare accounting reports
Business Ethics
Are the moral principles that guide the
conduct of individuals
Foundations of ethical behavior
Avoid small ethical lapses
Focus on your long term reputation
Expect to suffer adverse personal
consequences for holding to an ethical
position
Profession of Accounting
Private accounting
Employment by one business
Management accountants
Controllers- CMA
Internal Auditors – CIA
Public Accountants
Provide services on fee basis
CPA
Generally Accepted Accounting
Principles (GAAP)
Financial Accounting Standards Board
Business entity concept
Cost concept
Classifications of Accounts
Assets
Resources owned by
the business
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Cash
Accounts receivable
Prepaid expense
Merchandise
inventory
• Equipment
• Land
• building
Classification of Accounts
Liabilities
Rights of creditors or
debts of the business
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Accounts payable
Dividends payable
Accrued expenses
Mortgage payable
Notes payable
Classification of Accounts
Owner’s Equity
Shareholder’s equity
Rights of the owner’s
Capital stock
Retained earnings
Dividends
Accounting Equation
ASSETS =
Liabilities + Shareholder’s Equity
Classifications
Revenues
Income from
operation of the
business
Sales
Fees earned
Commission income
Expenses
Cost of doing
business
Salaries expense
Rent expense
Depreciation
expense
Misc expense