ACCOUNTING: THE LANGUAGE OF BUSINESS
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.
The process of identifying, measuring, summarizing and communicating
economic information to various users. There are two basic categories of users—internal
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.
we will focus on
and therefore, will use the
primary financial statements as the backdrop for this course.
There are three types of
, defined by their ownership and legal liability:
Number of owners
1. Sole Proprietorship
2 or more
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.