acctg-ch-1 - 1 CHAPTER 1 Chapter 1 Mugan-Akman 2007 2-28...

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Unformatted text preview: 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 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 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 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 Operating Activities • involve the daily activities of the entities to run...
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This note was uploaded on 03/08/2008 for the course BA ba1402 taught by Professor Adiloran during the Spring '08 term at Middle East Technical University.

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acctg-ch-1 - 1 CHAPTER 1 Chapter 1 Mugan-Akman 2007 2-28...

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