ch01_IMfinal

ch01_IMfinal - Chapter 1 Accounting as a F orm of...

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Chapter 1 Accounting as a Form of Communication Key Concepts: What is business about? What are the different forms of business and how can you distinguish one from another? What are the various types of business activities? Who are the primary users of accounting information and what are their needs? What information is communicated through the balance sheet, income statement, and statement of retained earnings? What are the primary assumptions made in preparing financial statements? What are the various groups involved in setting accounting standards and what is the role of auditors in determining whether the standards are followed? What is the critical role that ethics play in providing useful financial information? 1-1
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INSTRUCTOR’S MANUAL Chapter Outline LO1 What Business is about Business is all of the activities necessary to provide the members of an economic system of goods and services. Business activities focus on providing goods or providing services. LO 2 Forms of Business Organizations Business entities is an organization organized to earn a profit. Sole proprietorship: a business organization with one owner many small businesses are sole proprietorships affairs of the business and the owner must be kept separate not a taxable entity: any profits earned are taxed on the return of the owner Economic entity concept: the affairs of the business and the owners must be kept seperate Partnership: a business owned by two or more individuals partnership agreement: agreement how profits will be divided and how much each partner will contribute not a taxable entity: any profits earned are taxed on the return of the owners public accounting firms, law firms are often partnerships Corporations: business organized under the laws of a particular state stock certificate: evidence of ownership in a corporation stocks can be sold on organized stock exchanges (New York Stock Exchange or American Stock Exchange). Advantages of a corporation: ability to raise large amounts of money in relatively short time sale of stock: ownership in corporation sale of bonds: represents corporations promise to repay a certain amount and interest in the future Ease of transfer of ownership sale of stock to another owner limited liability: stockholder is only liable for the amount contributed to the business Nonbusiness entities exist to serve the needs of various segments of society. Lack of identifiable owner this type of entity uses fund accounting. eg. hospitals, municipal government 1-2
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CHAPTER 1 ACCOUNTING AS A FORM OF COMMUNICATION LO 3 Nature of Business Activity Business activities can be categorized into either: Financing activities, Investing activities and Operating activities Financing activities includes the sale of stock or borrowing to finance operations. Liabilities:
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This note was uploaded on 04/27/2011 for the course ACCT 2101 taught by Professor Christianwurst during the Spring '08 term at Temple.

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ch01_IMfinal - Chapter 1 Accounting as a F orm of...

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