Chapter 1 Lecture-1

Chapter 1 Lecture-1 - CHAPTER 1 CLASS NOTES ACCOUNTING: THE...

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CHAPTER 1 CLASS NOTES ACCOUNTING: THE LANGUAGE OF BUSINESS Accounting is the language of business, whether the information is recorded using a “quill”, pencil, pen, punch cards, or sophisticated computer. Everyone involved in business needs to understand and appreciate accounting information, where it comes from and how to use it. Accountants by nature are hardworking, careful and meticulous. They also dislike doing things twice, therefore, they build in controls and balances that ensure things are in balance before they proceed to the next step. They are not interested in finishing an assignment only to discover that it does not balance and there is an error thatbb they will now have to look for. Accounting: The process of identifying, measuring, summarizing and communicating economic information to various users. There are two basic categories of users—internal and external. Financial accounting is concerned with information for external users: the preparation of financial information through the primary financial statements for people outside the business. External users can be creditors, stockholders, suppliers, customers, government agencies, etc. Management or managerial accounting is concerned with information for internal users to be able to facilitate planning and control over the business directly. In Accounting 151, we will focus on financial accounting and therefore, will use the primary financial statements as the backdrop for this course. There are three types of business entities , defined by their ownership and legal liability: Number of owners Liability 1. Sole Proprietorship 1 Unlimited 2. Partnership 2 or more Unlimited 3. Corporations Unlimited Limited In Accounting 151, we will focus on corporations as the form of business used in all examples throughout the course.There are also a myriad of nonbusiness entities such as government agencies, schools, etc. All these entities (both business and nonbusiness) have some level of social responsibility, although in recent years there has been a laxness on their part. All of these entities have transactions and therefore, must account for these transactions properly as well as issue accurate and complete financial statements, which are a summary of the transactions that have occurred.
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-2- The Objective of Financial Reporting is to provide information for decision-making by some user. Remember that the information is provided to different users for different purposes and in different amounts of detail. However, all the information comes from the same accounting system within the business and is the culmination of recording all the
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This note was uploaded on 04/19/2008 for the course ACCT 151 taught by Professor Largay during the Spring '07 term at Lehigh University .

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Chapter 1 Lecture-1 - CHAPTER 1 CLASS NOTES ACCOUNTING: THE...

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