acctg-ch-1 - CHAPTER 1 Environment of a Business...

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1 CHAPTER 1 Chapter 1 Mugan-Akman 2007 2-28 Environment of a Business Organization General Environment of Businesses Task Environment of Businesses Chapter 1 Mugan-Akman 2007 3-28 Aim of the Accounting Information accounting is an information system that measures, processes and communicates financial information of an economic entity to the decision makers measurable systematic financial statements and other financial reports economic entity is an economic organization that acts independently business entity is an economic entity that sells goods or provides services
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2 Chapter 1 Mugan-Akman 2007 4-28 Business Information System Components Finance Marketing and Sales Human Resources Production Accounting Chapter 1 Mugan-Akman 2007 5-28 Purpose of Accounting To provide “decisionmakers” with “useful” information. Chapter 1 Mugan-Akman 2007 6-28 Users of Accounting Information executive officers 1. creditors ; investors 2. government ; regulatory agencies ; labor unions; financial advisors; brokerage firms; auditors; lawyers; consumer groups; and academicians External Users 1. Users with direct financial interest 2. Users with indirect financial interest Internal Users 1. Top management 2. Department managers
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3 Chapter 1 Mugan-Akman 2007 7-28 Users of Accounting Information decision makers - the users of the accounting information To whom is the business accountable? What is it accountable for? What is the role of accounting in this accountability? Chapter 1 Mugan-Akman 2007 8-28 Business Goals and Strategies Business Goal is the target of a business organization towards which all efforts are directed the goal of profit maximization or profitability the goal of liquidity Business Strategies are the means to achieve the set goals Chapter 1 Mugan-Akman 2007 9-28 Business Activities Operating Activities Investing Activities Financing Activities
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4 Chapter 1 Mugan-Akman 2007 10-28 Financing Activities initially needs funds to setup a business in later periods to run operations and to grow obtaining such funds either from external or internal sources Funds obtained: from creditors shareholders Funds provided to: payment of payment of interest dividends repayment of debts Cash management Chapter 1 Mugan-Akman 2007 11-28 Investing Activities Spending the funds obtained effectively and efficiently involve purchase and sale of – buildings, machinery or other investment instruments such as government bonds, treasury bills extending loans to other companies are expected to contribute directly or indirectly to the profit maximization and solvency goals of the business Chapter 1 Mugan-Akman 2007 12-28
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