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Chapter 1 Introduction to Accounting and Business

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

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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. After studying the chapter, you should be able to: 1. Describe the nature of a business. 2. Describe the role of accounting in business. 3. Describe the importance of business ethics and the basic principles of proper ethical conduct. 4. Describe the profession of accounting. 5. Summarize the development of accounting principles and relate them to practice. 6. State the accounting equation and define each element of the equation. 7. Explain how business transactions can be stated in terms of the resulting changes in the basic elements of the accounting equation. 8. Describe the financial statements of a proprietorship and explain how they interrelate. 9. Use the ratio of liabilities to owner’s equity to analyze the ability of a business to withstand poor business conditions. KEY TERMS: Business Limited Liability Corporation Profit Business Strategy Low-Cost Strategy Proprietorship Combination Strategy Manufacturing Business Service Business Corporation Merchandising Business Stakeholder Differentiation Strategy Partnership Value Chain Business is defined 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 There are three types of businesses: Manufacturing Businesses Merchandising Businesses Service Businesses There are three types of business organizations: Proprietorship Partnership 1
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Corporation 1. More than 70% of the businesses in the United States are organized as proprietorships.
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