{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

121_01sg - Chapter 1Summarizing Business Activity and Using...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Summarizing Business Activity and Using the Financial Statements 1 Chapter 1—Summarizing Business Activity and Using the Financial Statements CHAPTER OVERVIEW Chapter One introduces you to accounting. Some of the topics covered in this chapter are the types of business organization, the basic accounting equation, and financial statements. Like many disciplines, accounting has its own vocabulary. An understanding of accounting terminology and the other topics covered in this chapter will give you a good foundation towards mastering the topics in upcoming chapters. The specific learning objectives for this chapter are to 1. Understand accounting vocabulary and use it in decision making. 2. Analyze business activity with accounting concepts and principles. 3. Use the accounting equation to describe an organization’s financial position. 4. Read and interpret a company’s financial statements. 5. Understand the relationships among financial statements. CHAPTER REVIEW Objective 1 - Understand accounting vocabulary and use it in decision making. Accounting is a system that measures business activities, processes that information into reports, and communicates the results to decision makers. There are many users of accounting information. Individuals use accounting information to make decisions about purchases and investments and to manage their bank accounts. Businesses use accounting information to set goals for their businesses and to evaluate progress toward achieving those goals. Investors use accounting information to evaluate the prospect of future returns on their investments. Creditors use accounting information to evaluate a borrower’s ability to meet scheduled repayments of money loaned. Accounting information is also used by government regulatory agencies, taxing authorities, nonprofit organizations and others, such as employee and consumer groups. The three forms of business organization are 1. sole proprietorship - a business owned by one person. 2. partnership - a business owned by two or more individuals 3. corporation - a business owned by shareholders whose liability for business debts is limited to the amount the stockholder invested in the corporation. In the United States, proprietorships are numerically the largest form of business whereas corporations are the dominant form in terms of total assets, income, and number of employees. (Helpful hint: review exhibit 1-3 in the textbook.) A corporation is formed under state laws and has a legal identity distinct from its owner, the shareholders. Unlike in a proprietorship or partnership, the shareholders have no personal liability for the corporation’s liabilities. The shareholders elect a board of directors who appoint officers to manage the organization.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 Chapter 1 Objective 2 - Analyze business activity with accounting concepts and principles.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern