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Chapter 1 (Intro to Accounting and Business)

Chapter 1 (Intro to Accounting and Business) - Introduction...

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Introduction to Accounting and Business Learning Objectives 1. Describe the nature of business, the role of accounting, and ethics in business 2. Summarize the development of accounting principles and relate them to practice 3. State the accounting equation and define each element of the equation 4. Describe and illustrate how business transactions can be recorded in terms of the resulting change in the elements of the accounting equation 5. Describe the financial statements of proprietorship and explain how they interrelate Nature of Business and Accounting Organization where resources are assembled and processed to provide goods and services Objective in most cases is to earn a profit o Profit – difference between amounts received from customers and amounts paid for resources Types of Business o Services – sale of time and effort versus a product o Merchandising – sell products purchased from other businesses o Manufacturing – convert basic input into products for sale The Role of Accounting in Business o Provide information to managers who operate a business and provide information to others to assess business performance and condition o Language of business o Process of providing information Identify users Assess users’ information needs Design accounting information systems to meet those needs Record economic data about business activities and events Prepare accounting reports for users o Internal users Managers and employees Managerial accounting Relevant and timely information Not for public distribution o External users Customers, creditors, and government Financial accounting Relevant and timely information for external users Public distribution
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Role of Ethics in Accounting and Business o Accountants reputation is all they have Users of financial information must trust the source to be useful o Business managers must also behave ethically o Ethics
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