ch01 - CHAPTER 1 Accounting in Action STUDY OBJECTIVES 1...

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CHAPTER 1 Accounting in Action STUDY OBJECTIVES 1. EXPLAIN WHAT ACCOUNTING IS. 2. IDENTIFY THE USERS AND USES OF ACCOUNTING. 3. UNDERSTAND WHY ETHICS IS A FUNDAMENTAL BUSINESS CONCEPT. 4. EXPLAIN THE MEANING OF GENERALLY AC- CEPTED ACCOUNTING PRINCIPLES AND THE COST PRINCIPLE. 5. EXPLAIN THE MEANING OF THE MONETARY UNIT ASSUMPTION AND THE ECONOMIC ENTITY ASSUMPTION. 6. STATE THE BASIC ACCOUNTING EQUATION AND EXPLAIN THE MEANING OF ASSETS, LIABILITIES, AND OWNER’S EQUITY. 7. ANALYZE THE EFFECT OF BUSINESS TRANS- ACTIONS ON THE BASIC ACCOUNTING EQUATION. 8. UNDERSTAND WHAT THE FOUR FINANCIAL STATEMENTS ARE AND HOW THEY ARE PREPARED. 1-1
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CHAPTER REVIEW Accounting Defined 1. (S.O. 1) Accounting is an information system that identifies, records, and communicates the economic events of an organization to interested users. a. The first part of the process, identifying, involves selecting those events that are con- sidered evidence of economic activity relevant to a particular business organization. b. Recording is the keeping of a chronological diary of events, measured in dollars and cents. c. Communication occurs through the preparation and distribution of accounting reports. 2. The accounting process consists of: Identification à Recording à Communication. 3. (S.O. 2) Internal users of accounting information are managers who plan, organize, and run a business. These include marketing managers, production supervisors, finance directors, and company officers. 4. External users include investors, creditors, taxing authorities, regulatory agencies, labor uni- ons, customers, and economic planners outside the business. 5. Bookkeeping is not the same as accounting. Bookkeeping involves only the recording of economic events, while accounting also includes identification, recording, and communica- tion. Bookkeeping is therefore only a part of accounting. 6. Accounting is also divided into financial versus managerial accounting. Financial account- ing is the field of accounting that provides economic and financial information for investors, creditors, and other external users. Managerial accounting provides economic and finan- cial information for managers and other internal users. 7.
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This note was uploaded on 01/27/2010 for the course MGT 011A taught by Professor Hancock,john during the Spring '07 term at UC Davis.

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ch01 - CHAPTER 1 Accounting in Action STUDY OBJECTIVES 1...

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