The Role of Accounting in Business
Business: an organization in which basic resources (inputs), such as materials and
labor, are assembled and processed to provide goods or services (outputs) to
Customers: individuals or other business who purch
Investing Activities: obtain the necessary assets to start and operate a business
Tangible assets: cash, land, property, plant, and equipment
Intangible assets: goodwill, copyrights or patents
Accounts receivable: rights to payments from customers
Define the purposes of the Sarbanes-Oxley Act of 2002.
Passed by congress in order to restore public confidence and trust in the financial
statements of companies
Identify specific internal controls over the asset cash.
Know how bank accounts and monthly
obtaining funds to begin and operate a business
Liability: a legal obligation to repay the amount borrowed according to the
terms of the borrowing agreement
Bonds payable: bond obligations
Interest payable: any interest due
Define in words the following terms, and be able to give several examples of each one.
state on which financial statement they appear:
a. assets-resources owned by a business appears on balance sheet
b. liabilities-a legal obligation to repay an amount bo
Know how to calculate net sales, cost of merchandise sold, operating income, and net
Distinguish between selling expenses and administrative expenses.
Selling expenses are incurred directly during the sale of merchandise while
Assets: resources owned by business for future use in generating revenue
Tangible (physical substance)
Intangible (no physical substance)
State why the accrual basis of accounting is required by GAAP.
GAAP requires accrual basis of accounting in order to reflect a companys financial
position during a period and avoid misleading results based on the timing of cash
receipts and payments i.e.
Accounting period concepts
a. Changes in financial condition are reported at end of month
Adequate disclosure concept
a. Changes in the use of accounting methods; material litigation involving the
corporation; from one period to