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Section 1 Exploring the World of Business (cont'd.) Key Terms  free enterprise system  profit  loss  entrepreneur  capital  service business  merchandising.

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Presentation on theme: "Section 1 Exploring the World of Business (cont'd.) Key Terms  free enterprise system  profit  loss  entrepreneur  capital  service business  merchandising."— Presentation transcript:

1 Section 1 Exploring the World of Business (cont'd.) Key Terms  free enterprise system  profit  loss  entrepreneur  capital  service business  merchandising business  manufacturing business  sole proprietorship  partnership  corporation Key Terms  free enterprise system  profit  loss  entrepreneur  capital  service business  merchandising business  manufacturing business  sole proprietorship  partnership  corporation

2 The Environment of Business In a free enterprise system people are free to produce the goods and services they choose. The Environment of Business In a free enterprise system people are free to produce the goods and services they choose.  Nike Outlet Store  Dell Computer Corp.  Dan’s Lawn Care  Silverado Theatres  Kroger  Rose’s Nail Salon  Bethlehem Steel  Nike Outlet Store  Dell Computer Corp.  Dan’s Lawn Care  Silverado Theatres  Kroger  Rose’s Nail Salon  Bethlehem Steel Section 1 Exploring the World of Business (cont'd.)  GM Motors  Visible Changes  Hollywood Video  The Gap  Mrs. Baird’s Bakery  Century 21 Real Estate  Macy’s  GM Motors  Visible Changes  Hollywood Video  The Gap  Mrs. Baird’s Bakery  Century 21 Real Estate  Macy’s

3 The Need for Profit The amount of money earned over and above the amount spent to keep the business operating is called profit. Business that spend less money they than earn operate at a profit. Businesses that spend more money than they earn operate at a loss. The Need for a Risk-Taker Entrepreneurs transform ideas for products or services into real-world businesses. Section 1 Exploring the World of Business (cont'd.)

4 Entrepreneurship: Who Me? Have you ever considered owning a business? Entrepreneurship: Who Me? Have you ever considered owning a business? Pros  You are your own boss  You create opportunities for earning money.  You create and control your work schedule.  You choose the people you serve.  You select the people who work with you.  You benefit from the rewards of your own hard work.  You choose your own work hours. Cons  You probably need to work long hours.  You lose the security of steady wages and medical benefits an employer provides.  You market your own services or products.  You pay for your own operating expenses.  You must be motivated and energetic each day.  You face the possibility of losing money. Section 1 Exploring the World of Business (cont'd.)

5 Types of Business Operations  What is a Service Businesses  operate to provide a needed service  What is a Merchandising  buys finished products and resells them  What is a Manufacturing Businesses  buys raw materials and transforms them into finished product Section 1 Exploring the World of Business (cont'd.)

6 Forms of Business Organizations  Sole proprietorship  Partnership  Corporation  Sole proprietorship  Partnership  Corporation Section 1 Exploring the World of Business (cont'd.)

7 Sole Proprietorship A business owned by one person. Section 1 Exploring the World of Business (cont'd.)

8 Advantages:  Easy to set up  All profits go to owner  Owner has total control  Few regulations to follow Disadvantages:  Limited expertise  Hard to raise money  Owner has all the risks  Hard to attract talented employees Section 1 Exploring the World of Business (cont'd.) Sole Proprietorship

9 Partnership A business owned by two or more persons, who agree to operate the business as co-owners. Section 1 Exploring the World of Business (cont'd.)

10 Partnership Advantages:  Easy to start  Skills and talents are pooled  More money available Disadvantages:  Conflicts between partners  Profits must be shared  Owners share all risks Section 1 Exploring the World of Business (cont'd.)

11 Corporation A business organization that is recognized by law to have a life of its own. Section 1 Exploring the World of Business (cont'd.)

12 Corporation Advantages:  Easier to raise money  Easy to expand  Easy to transfer ownership  Losses limited to investment Disadvantages:  Costs more to start up  Complex to organize  More regulations  Higher taxes Section 1 Exploring the World of Business (cont'd.)

13 Partner Work Problem 2-4 – 40 Problem 2-7 – 41 Problem 2-8 – 41 Due when you get to class. First homework check –Stamp Bonus problems (+5pts on stamp) p. 35 Computing in the Business World. p Problem 2-6 Show all you math calculations to receive any bonus points!!! Put on a separate sheet of paper – this will be turned in individually. Stamp 1

14 Section 2 Accounting: The Universal Language of Business Key Terms  accounting system  manual accounting system  computerized accounting system  GAAP Key Terms  accounting system  manual accounting system  computerized accounting system  GAAP  financial accounting  managerial accounting  business entity  accounting period  going concern  financial accounting  managerial accounting  business entity  accounting period  going concern

15 The Accounting System Designed to collect, document, and report on financial transactions affecting the business. The system will utilize: Section 2 Accounting: The Universal Language of Business (cont'd.)  manual accounting system  computerized accounting system  generally accepted accounting principles (GAAP)  financial reports

16 How the Accounting System Works Section 2 Accounting: The Universal Language of Business (cont'd.) Inputs Source Documents Inputs Source Documents Processing Tasks Processing Tasks Outputs Financial and Management Accounting Reports Outputs Financial and Management Accounting Reports  Financial condition  Results of operations  Investments by and distributions to owners  Financial condition  Results of operations  Investments by and distributions to owners  Analyzing  Classifying  Recording  Analyzing  Classifying  Recording  Checks  Invoices  Sales Slips  Receipts  Checks  Invoices  Sales Slips  Receipts

17 Using Accounting Reports for Making Business Decisions There are two groups that use accounting reports: Using Accounting Reports for Making Business Decisions There are two groups that use accounting reports: Section 2 Accounting: The Universal Language of Business (cont'd.)  individuals outside the business who have an interest in the business  individuals inside the business

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19 Financial Accounting Financial accounting focuses on reporting information to external users. Section 2 Accounting: The Universal Language of Business (cont'd.) Who Uses Financial Accounting Reports?  potential investors  individuals and institutions, such as banks, that loan money to a business  local, state, and federal governments (taxing authorities and regulatory agencies  workers, consumers, union leaders, and competitors, customers, suppliers

20 Managerial Accounting Managerial accounting focuses on reporting information to management. Section 2 Accounting: The Universal Language of Business (cont'd.)  Managers  Owners  Supervisors  Board of Directors  Officers of the business Who Uses Managerial Accounting Reports?

21 Financial AccountingManagement Accounting Planning and control: Financial accounting helps in making investment decision, credit rating. Management Accounting helps management to record, plan and control activities to aid decision-making process. Focus:Financial accounting focuses on history.Management accounting focuses on future & present. Reporting frequency and duration: Well-defined - annually, semi-annually, quarterly As needed - daily, weekly, monthly. Optional?:Preparing financial accounting reports are mandatory especially for limited companies. There are no legal requirements to prepare reports on management accounting. Objectives:The main objectives of financial accounting are :i) to disclose the end results of the business, and ii) to depict the financial condition of the business on a particular date. The main objectives of Management Accounting are to help management by providing information that used by management to plan, evaluate, and control. Segment reporting:Pertains to the entire organization or materially significant business units. May pertain to smaller business units or individual departments, in addition to the entire organization. Nature of information: Focus on quantitative informationFocus on both qualitative and quantitative information Comparison

22 Accounting Assumptions Section 2 Accounting: The Universal Language of Business (cont'd.)  business entity  The business exists independently of its owner’s personal holdings  accounting period  The period of time covered by accounting reports; monthly, quarterly, yearly  going concern  The business is expected to continue

23 1.The business has been in business for 12 years. 2.The personal residence of the owner of the business, valued at $200,000, is not reported in the accounting records of the pet store. Buildings owned by the business are included in the financial records and reports of the pet store. 3.The business provides grooming for domestic animals. 4.The business prepares financial reports every three months; quarterly. 5.The business has a name: Siera Pet Grooming 6.The business has a single owner: Randy Moke 7.The owner has a family that is employed at the business What number or numbers: Identifies the type of business? Identifies the form of business ownership? Identifies accounting assumptions for: business entity going concern accounting period

24 1.The business has been in business for 12 years. 2.The personal residence of the owner of the business, valued at $200,000, is not reported in the accounting records of the pet store. Buildings owned by the business are included in the financial records and reports of the pet store. 3.The business provides grooming for domestic animals. 4.The business prepares financial reports every three months; quarterly. 5.The business has a name: Siera Pet Grooming 6.The business has a single owner: Randy Moke 7.The owner has a family that is employed at the business What number or numbers: Identifies the type of business? #3, #5 Identifies the form of business ownership? #6 Identifies accounting assumptions for: business entity #2, #5 going concern #1 accounting period #4

25 Partner Work Problem 2-5 – 40 Problem 2-3 – 35 Problem 2-2 – 35 There are many possible responses for 2-2 Due when you get to class- 1 Stamp Stamp 2

26 Check Your Understanding Assignment: Chapter 2 Review – or PDF On-line connect in class Assignment: Chapter 2 Review – or PDF On-line connect in class

27 Partner Class Work: 1.Create a business of your own – it must be a service business – a sole proprietorship. One of you is the owner, the other will be an employee of the business. 2.Decide what the name of the business will be. The name of the business must insinuate what type of service you provide. Include a description of the services your business will provide. 3.Make a list of the things of value (including cash) you will need to start the business. Indicate where you will get these things (from yourself, a loan from the bank or have the business buy it on credit). Assign a dollar value to all of the things you list. Partner Class Work: 1.Create a business of your own – it must be a service business – a sole proprietorship. One of you is the owner, the other will be an employee of the business. 2.Decide what the name of the business will be. The name of the business must insinuate what type of service you provide. Include a description of the services your business will provide. 3.Make a list of the things of value (including cash) you will need to start the business. Indicate where you will get these things (from yourself, a loan from the bank or have the business buy it on credit). Assign a dollar value to all of the things you list.


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