Accounting: The
Key to Success
CHAPTER 1
Learning Objectives
Describe the purpose and importance of
accounting. (LO1)
Describe forms of business organization.
(LO2)
Identify users and uses of, and opportunities
in, accounting. (LO3)
Identify and explain why ethics and social
responsibility are crucial to accounting. (LO4)
1.
2.
3.
4.
1-2
Learning Objectives
Identify, explain, and apply accounting
principles. (LO5)
Identify and explain the content and
reporting aims of financial statements. (LO6)
Analyze business transactions by applying
the accounting equation. (LO7)
Prepare financial statements reflecting
business transactions. (LO8)
5.
6.
7.
8.
1-3
What is Accounting?
•
•
•
A system (process and rules)
Related to the preparation of Financial
Information
To be used in
• Analysis
• Decisions
• Management
1-4
LO 1
Bookkeeping or Recordkeeping



Recording of financial transactions
Manual or electronic
Purpose is to create a reliable bank of
data
1-5
Forms of Organization
•
•
•
Sole Proprietorship
Partnership
Corporation
1-6
LO 2
Sole Proprietorships
•
•
•
•
•
•
One owner
Separate entity for
accounting purposes
Not a separate legal entity
from the owner
Unlimited liability
Limited life
Owner taxed on profits
1-7
LO 2
Partnerships
•
•
•
•
•
•
Two or more owners
Separate entity for
accounting purposes
Not a separate legal
entity from the owners
Unlimited liability
Limited life
Owners taxed on profits
1-8
LO 2
Corporations
•
•
•
•
•
•
•
One or more owners
Separate entity for accounting
purposes
Separate legal entity from the
owner(s)
Limited liability
Unlimited life
Corporation taxed on profits
Size doesn’t matter
1-9
LO 2
Non-Business Organizations
•
•
•
Not-for-profit and
government organizations
No identifiable owner
Examples: schools,
charities, libraries,
hospitals, police, shelters
1-10
LO 2
1-11
Exercise


Exercise 1-1 pg 43 (What kind is it?)
QS 1-2 pg 39 (Accounting v Bookkeeping)
1-12
Users of Accounting Information
Internal

Managers

Employees

Owners?
1-13
External: Not directly
involved in running the
organization
 Bankers and other creditors
 Investors and potential
investors
 Unions
 External auditors
 CRA
Investors v Managers v Owners:
All the same people, or NOT
LO 3
Typical Questions Asked
by Internal Users
What are the manufacturing expenses per
unit of product?
 What is the most profitable mix of services?
 How much do we have to sell to break even?
 How much profit did we earn last month?
 Are we keeping our expenses under control?

1-14
LO 3
Typical Questions Asked
by External Users





Can the company repay current loans?
Is the purchaser able to pay for goods
purchased?
Do revenues include only those for the current
period?
Have all expenses been recorded?
Is net income large enough to support a request
for increased pay?
1-15
LO 3
Ethics in Accounting
•
•
•
One of the primary goals of accounting is
to provide useful information for decision
making.
In order for the information to be useful, it
must be trusted.
Accountants must act in an ethical manner
in order for the information they produce to
be trusted.
1-16
LO 4
Ethical Obligations of Accountants
•
•
•
•
Maintain a high level of professional
competence
Treat sensitive information as confidential
Exercise due care and professional
judgment
Must not be associated with deceptive
information
1-17
LO 4
Practice

Exercise 1-4 page 44 (Ethics)
1-18
Accounting Opportunities
Broad fields of accounting include:
•
Financial accounting
•
Managerial accounting
•
Taxation
•
Accounting-related fields
1-19
LO 3
Accounting Opportunities
Accountants may work as:
• Private accountants
• Public accountants
• Government accountants
1-20
LO 3
Professional Certification
Professional certifications in Canada:
•
•
•
Certified General Accountant (CGA)
Certified Management Accountant (CMA)
Chartered Accountant (CA)
1-21
LO 3
Exercise

Critical Thinking Mini Case page 62
Problem?
 Goals?
 Assumptions?
 Facts?
 Conclusion and Consequences?

1-22
Homework – Additional Practice

First D2L Quiz DUE
before seminar starts!
Exercise 1-3
 Problem 1-1A

1-23