Accounting Notes Chapter.1

Accounting Notes Chapter.1 - Ch.1 A.What is Accounting...

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Ch.1 A.What is Accounting? 1.Accounting is an information system in which: >underlying economic conditions of organizations >individuals, are recorded, summarized, reported, and understood 2.Struture: >Simple: ++balancing your personal cheque book >Complex ++recording and reporting on the economic condition of a multinational corporation eg. Microsoft 3.Usefulness: >provides vital financial information >provides the very framework around which people and organizations make decisions 1
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B. Forms of Organization 1.different types of organization: > profit-seeking entities such as corporations; > governing organizations such as federal, provincial, and municipal governments; > service entities such as hospitals and academic institutions; >not-for-profit entities such as charities and clubs 2.Necessary of accounting >the above organisations all need information that tells their users whether they are ++ financially sound, ++meeting their goals, ++ likely to remain viable in the future >capture financial information about an entity and present it to users (in a fair way) 3. Corporation >Almost every large business in Canada > owners make similar investments in the company but their ownership interest is called shareholders' equity and is represented by documents known as shares ++share is simply a document that represents a small part of ownership in the corporation >Corporations whose shares are held by a larger number of individuals or entities and trade on a public stock exchange (such as the Toronto Stock Exchange) are called publicly traded corporations ++advantage:shares can be easily transferred to another investor >. Corporations whose shares are held by a small number of individuals are sometimes called privately held corporations . The shares in these corporations do not trade on the public stock exchanges, which makes the transfer of ownership more difficult. Except in some small corporations, shareholders typically do not become involved in the day-to-day operation of the business 2
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> Daily working basis: ++.Because of the large number of shareholders and their lack of involvement in day-to-day
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