LectureChapterOnePart1.pdf - Chapter One Introduction to...

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9/1/2010 1 Chapter One Introduction to Accounting and Business Part I of III Nature of Business and Accounting checkbld What is a Business? A Business is a separate economic entity/unit that aims to sell goods and services to customers at prices that will provide an adequate return to its owners. checkbld What are the Two Main business goals? Profitability - Difference between amounts earned for goods and/or services provided to customers and the amounts paid for the inputs used to provide the goods and/or services. Liquidity – The ability to pay debts/obligations when they are due. Maintaining a sufficient cash balance.
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9/1/2010 2 Nature of Business and Accounting checkbld What are the two main business goals? Profitability - Difference between amounts earned for goods and/or services provided to customers and the amounts paid for the inputs used to provide the goods and/or services. The business goal of Profitability is communicated through the Income Statement . Liquidity – The ability to pay debts/obligations when they are due. Maintaining a sufficient cash balance. The positive Gain from business operations when Revenues earned are greater then Expenses . A Net Loss occurs from business operations when Expenses are greater then the Revenue earned The business goal of Liquidity is communicated through the Balance Sheet and Statement of Cash Flows Nature of Business and Accounting checkbld What is the purpose of Accounting? 1. Identify , 2. Record , and 3. Communicate the economic events of an organization to the interested users checkbld Accounting is known as the Language of Business The purpose of the accounting language is to convey information about the business’ operations.
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