ch1 - Chapter 1 Introduction to Accounting and Business _...

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1 Chapter 1 Introduction to Accounting and Business ______________________________________________ Chapter 1 begins with a discussion of the three different types of businesses (manufacturing, merchandising, and service) and types of business organization (proprietorship, partnership, and corporation). Next, the chapter describes accounting as an information system, introduces business ethics, and provides a description of the accounting profession. Following this introductory information, the text explains the accounting equation and begins the discussion of recording business transactions in accounts. When transactions are recorded, changes in assets, liabilities, and owner's equity are stated as "increases" or "decreases"––the terms debit and credit are not introduced until Chapter 2. The chapter ends with examples of how to prepare financial statements and how to analyze a balance sheet using the ratio of liabilities to owner’s equity. Definition of Business Business is as “an organization in which basic resources (inputs), such as materials and labor, are assembled and processed to provide goods or services (outputs) to customers.” Types of Businesses and Types of Business Organizations Manufacturing Businesses Merchandising Businesses Service Businesses Types of business organizations: Proprietorship Partnership Corporation 1. More than 70% of the businesses in the United States are organized as proprietorships. 2. About 10% of businesses are organized as partnerships. 3. About 20% of businesses are organized as corporations; however, they generate over 90% of the total dollars of business receipts. Business Stakeholder A business stakeholder is “a person or entity that has an interest in the economic performance of the business.” Stakeholders include owners, managers, employees, customers, creditors, and various government agencies. These stakeholders use accounting data to gauge the economic performance of businesses. EXERCISES & PROBLEMS FOR REINFORCEMENT:
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2 Exercise 1-1 Exercise 1-2 Accounting Accounting is an “an information system that provides reports to stakeholders about the economic activities and condition of a business Accounting as an Information System
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ch1 - Chapter 1 Introduction to Accounting and Business _...

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