Week 1 Chapter 1 - 1 Accounting in Action Chapter STUDY...

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2 Chapter 1 Accounting in Action Scan Study Objectives Read Feature Story Read Preview Read text and answer Before You Go On p. 7 p. 13 p. 20 p. 24 Work Demonstration Problem Review Summary of Study Objectives Answer Self-Study Questions Complete Assignments After studying this chapter, you should be able to: 1 Explain what accounting is. 2 Identify the users and uses of accounting. 3 Understand why ethics is a fundamental business concept. 4 Explain generally accepted accounting principles and the cost principle. 5 Explain the monetary unit assumption and the economic entity assumption. 6 State the accounting equation, and define assets, liabilities, and stockholders’ equity. 7 Analyze the effects of business transactions on the accounting equation. 8 Understand the four financial statements and how they are prepared. The Navigator STUDY OBJECTIVES Feature Story KNOWING THE NUMBERS Consider this quote from Harold Geneen, the former chairman of IT&T : “To be good at your business, you have to know the numbers—cold.” Success in any business comes back to the numbers. You will rely on them to make decisions, and managers will use them to evaluate your performance. That is true whether your job involves marketing, production, management, or information systems. In business, accounting and financial statements are the means for communi- cating the numbers. If you don’t know how to read financial statements, you can’t really know your business. When Jack Stack and 11 other managers purchased Springfield ReManufacturing Corporation (SRC) ( www.srcreman.com ) for 10 cents a share, it was a failing The Navigator is a learning system designed to prompt you to use the learning aids in the chapter and set priorities as you study. Study Objectives give you a framework for learning the specific concepts covered in the chapter. The Navigator
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3 division of International Harvester . Stack had 119 employees who were counting on him for their livelihood, and he knew that the company was on the verge of financial failure. Stack decided that the com- pany’s only chance of survival was to encourage every employee to think like a busi- nessperson and to act like an owner. To accomplish this, all employees at SRC took basic accounting courses and partici- pated in weekly reviews of the company’s financial statements. SRC survived, and eventually thrived. To this day, every employee (now numbering more than 1,000) undergoes this same training. Many other companies have adopted this approach, which is called “open- book management.” Even in companies that do not practice open-book management, employers generally assume that managers in all areas of the company are “financially literate.” Taking this course will go a long way to making you financially literate. In this book you will learn how to read and prepare financial statements, and how to use basic tools to evaluate financial results. Appendixes A and B
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Week 1 Chapter 1 - 1 Accounting in Action Chapter STUDY...

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