Accounting 101.
Chapter 1.
The objective of most businesses is to maximize profits.
Although some business operate with the object other than to maximize profit, they are
called non profit business. These businesses have the objective of providing some sort of
public service or benefit, such as medical research, conservation, also government units
are considered non profit.
Types of businesses: There are three types.
1. Manufacturing businesses: chage the basic inputs into products that are sold o
individual customers, examples of manufacturing business and some to their
products.
a. General motors
b. Intel
c. Boeing
d. Nike
e. Coca Cola
f. Sony
2. Merchandising Businesses: also sell products to customers, however, rather than
making the products, they purchases them from manufactures or other businesses.
In this sense, merchandisers bring products and customers together.
a. Wal-Mart
b. Toys R Us
c. Circuit City
d. Land’s End
e. Amazon.com
3. Service Businesses: Provide services rather than products to customers.
a. Disney
b. Delta airlines
c. Merrill Lynch
d. Andersen Consulting
Roughly 80% of the work force in the United States is in the service industry.
Factors of production: When business convert basic inputs into goods and services for
customers, these are called factors of production.
Business Breakdown.
70% are proprietorships
10% are Partnerships
20% are corporations.
Even though corporations make up only 20% of businesses, they account for 90% total
business dollars.
Start page 6 reading.
Questions:
1. The objective of most business is to make a profit.
2. Business stakeholders normally include the owners, employees, creditors,
managers, and the government.
3. What is the role of accounting in business. Accounting is used by mangers to
provide information for operating that business, as well as by the other
stakeholders to use in assessin the economic performance and condition of the
business.
4. What three sound principles form the foundation of ethical behavior? 1. Avoid
small ethical lapses. 2. Focus on your long term reputation, 3. Expect to suffer
adverse person consequences for holding to an ethical position.
5. Distinguish between private accounting and public accounting? Public
accountants basically operate as contractors and provide their services to other
businesses. Private accounting can be thought of as in house accounting. Private
accountants
6. Identify what the abbreviation FASB stands for and how the FSAB sets gernally
accepted accouting principles. FASB stands for the Financial Accounting
Standards Board.
10. What are the two principal rights to the properties of a business? Rights of the
creditors and rights of the owners. Rights of the creditors is known as liabilities and
the rights of owners is called owner’s equity.
11. Name the three elements of the accounting equation. 1, Assets,2 liabilities, and 3
owner’s equity.
12. Describe the difference between an account receivable and an account payable.
An accounts payable is money owed, or a right of a creditor to the business, accounts
receivable is a right of the owner and considered an asset.
15. What two types of transactions increase the owner’s equity of a proprietorship?
Owner’s investment, and revenues increase owner’s equity.
16. Briefly describe the nature of the information provided by each of the following
financial statements.
A. Income statement: Summary of revenues and expenses for a given period of
time.
B. Statement of Owner’s equity A summary of changes in the owner’s equity that
have occurred during a specific period of time.
C. Balance sheet: Lists liabilities and owner’s equity on the left side and assets
on the right side. (as of a given or specific date)
D. Statement of cash flow. A summary of cash receipts and cash payments for a
specific period of time.
17.
18.
Indicate whether each of the financial statements in question 16 cover a period
of time or a for a specific date.
What particular item of financial or operating data appears on both the
incomestatement and the statement of owner’s equity. What item appears
onn both the balance sheet and the statement of cash flow.? A. Net income
appears on both the Income Statement and the Statement of Owner’s
equity. CASH appears on both the balance sheet and the Statement of
Cash flow.
Problem 1A.
ASSETS
Cash+Accounts Recv+Supplies
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
9385
= Liabilities +
Acct Payable
Owner’s Equity
+ Linda Neece, Captial
10,000 increase in cash, 10,000 increase owner’s equity.
Decrease in cash to 8850 Increase supplies 1150
Increases cash 4500, increase owner equity 4500
Decrease cash 2500, Decrease Owner’s equity 2500
Decrease cash 675, decrease Accounts payable 675
Increase accounts recev 3250 increase Owner’s Equity
Decrease cash 1755, decrease owner’s equity 1755
Decrease cash 1500, decrease owner’s equity 1500
Decrease supplies 935, decrease owner’ equity 935
Decrease cash 1000 decrase owner’s equity 10000
Balance 10,000
Balance 10,000
Balance 14,500
Balance 12,000
Balance 11,325
Balance 14575
Balance 12820
Balance 11320
Balance 10385
Balance 9385