Chapter1 Accounting
1.Definition of Accounting
Accounting
is
an
Art
as
well
as
Science
of
Identifying,Recording,Analyzing,Classifying,Summarizing,ReportingCommunicating and
Interpretation
2.Terms
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Art…………skilled knowledge
Science……………Using formulas proofs and why
Identify………MEANS WHAT HAPPENS,WHEN A MONEY ACTIVITY OCCUR
Analyze…….Means Comparison Mobile 120$
Mobile 160$..
Record…………
Classify………
Summarize…Samiir lucky Bill 200$-180 =20$ (Summarize)
Interpret…………………..Deep Understanding by Mind
Communicate………..A bill from One person to Another person
Report… Last information
Financial Character
In terms of Money
3.Accounting process
 Recording (BOOK-KEEPING)
 Classifying
 Summarizing-(End of Calculation)
 Analyze
 Report
4.Define Business
An activity with purpose of earning a profit(Money)(Accounting)
5.Legal Forms of Business Organization
 as public Sector
 private Sector form of ownership
 Public-Private Partnership Form
6.Forms of Business Organizations
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there are four forms of organizations for a business unit.
Sole proprietorship (ownership by one individual)
Partnership (ownership by two or more people)
Company (ownership by the shareholders)
Cooperative
7 Definition four form
Sole proprietorship is owned by one individual. 70% of the world
Advantage sole
 Easy in Organizing
 Low Cost of Organizing
Dis _advantage sole
 Limited Source of Financial resource
 Unlimited liabilities
Partnership is a business co- owned by two or more people/ not more than 7 people
Advantage partnership
 More financial Resources than a proprietorship
 Additional management skills
Dis_ Advantage partnership
 Un limited liabilities
Cooperation is organized under state or federal statutes as a separate legal entity
Advantage cooperation
 The ability to obtain large amounts of resources by issuing stocks
Dis_ Advantage cooperation
 Double taxation
Company a type of business organization that combines features of a
cooperation and those of a partnership and sole
8.Difference Between Form and Operation
Form of organization
 Sole trade
 Partner
 Cooperation
 Company
Operation
 Service business
 Merchandize business
 Manufacturing
9.Service/Operational Business
Service business: a commercial enterprise that provides work performed in an expert
manner by an individual
9.Merchandize/Supplies/Goods Business
A business that purchases goods produced by others and then sells them to customers to
earn profit.
10.Manufacturing Business
A business that produces a product to sell to its customers to earn profit. Raw Material are
Processed and turned into Finished Goods
11.Business Strategies
Under a low-cost strategy
 a business designs and produces products or service of acceptable quality at a cost lower
than that of its competitors
Under a differential strategy,
 a business designs and produces products or services that possess unique attributes or
characteristics which customers are willing to pay a premium price.
12. Ethics in accounting
Ethics are the Principles of Moral Conducts that guide the behavior of Individuals and
Businesses.
Business
12.Value Chain of
A value Chain Is the way a business Adds value for its customers by processing Inputs, into
Products, service and Output.
13.Users of Accounting Information/Business Stakeholders
A business stakeholder is a person or entity having an interest in the economic Performance of the
Business.
14.Generally Accepted Accounting Principles (GAAP)
Generally accepted accounting principles are a set of standards and rules that are
recognized as a general guide for financial reporting.
15.Cost Principles
According to this Principle, An asset is recorded at its cost in the books of accounting
16.Dual Principles
Under these concepts, every transaction has got two sides receiving the benefit, giving the
benefit
 A Person( Customer)
 B Person(Owner)
17. going concern assumption
Assumers that the enterprise will continue to operate
18.Implication
Capital asset are recorded at cost instead of liquidation value