BBI10pg179-182.pdf - ACTIVITIES FOR \u2026 INFORMATION CONNECTION EXTENSION 1 a What is accounting Why is it important to a business b Choose a local


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179 Chapter 8 • The Role and Functions of Accounting The kinds of activities that a business is involved in help determine the accounting method that the business uses. Businesses fall into certain categories because they conduct specific types of transactions. The record-keeping system that each business uses has to accommodate these different kinds of transactions. Let’s look at the three major types of businesses: service (excluding retail), retail, and manufacturing. S ERVICE B USINESSES Service businesses require the simplest type of accounting. What these businesses sell is intangible. For example, you may pay $11 for a movie ticket, but you’re not paying for the ticket itself. You’re paying for per- mission to enter the theatre. The ticket is only proof that you paid. Imagine that you have a snow-removal business. Recording your transactions would be simple: gas purchases for the snow blower, I NFORMATION C ONNECTION E XTENSION 1. a) What is accounting? Why is it important to a business? b) Choose a local business. With a partner, brainstorm at least 10 different types of transactions that the business might make. c) For each of the 10 transactions you listed in Question 1b, state what two things happened. (For example, cash went down and labour expenses went up.) 2. a) Why do businesses need to keep financial records? b) Interview the owner or manager of a local business to find out how he or she budgets for his or her business. c) With a partner, examine a tax form that businesses need to complete for the Canada Customs and Revenue Agency. Talk about terms you understand. List terms that you do not understand. At the end of the chapter, look back at your list to see which terms remain unclear. 3. a) What are financial statements? Who might be interested in them, and why? b) Obtain a copy of an annual report from a company that interests you. Browse through the report to see what financial statements it includes. c) If you were going to invest money in a business, how much would you rely on its annual report to make your decision?
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