Learning Goals: To understand what accounting is Identify the users and uses of accounting in business Describe the different forms of business organizations and the advantages and disadvantages of each

WHAT IS ACCOUNTING?

Accounting is a system of dealing with financial information that provides data for decision making

$$Profit$$ Revenue Capital Expenses Payroll Taxation Projections What information would you want your accounting records to provide as an owner? $$Profit$$ Revenue Capital Expenses Payroll Taxation Projections

What information might other people or organizations be interested in? Government- Tax Purposes – Rick Mercer Report Investors- are they making good choices? Banks/ Financial Institutes- providing loans

5 main activities involved in accounting: Gathering Financial Information About the activities of a business or other organization, ie. Profit, debt payments, sales 2. Preparing & Collecting Permanent Records Records provide evidence (source documents) or purchase, proof of payment, details of payroll and so on They also serve as the basis for dealing with other companies

3. Rearranging, Summarizing and Classifying (journalizing) financial information into a more usable form 4. Preparing Information Reports and Summaries for.. To help management reach decisions To serve the needs of groups outside the business, ie. Bankers and investors To measure the profitability of the business 5) Establishing controls to promote Accuracy and honesty among employees

Can we finance a business expansion? By enabling financial information to be gathered and prepared, a good accounting system provides the answers to many questions. Can we finance a business expansion? Do we have enough money to meet our needs? Are our customers paying their bills on time?

Types of Businesses: 1. Service Business Sells a service, it does not make or sell a product Examples? 2. Merchandising Business Buys goods and resells them at a higher price for a profit Examples? 

3. Manufacturing Business Buys raw materials, converts them into a new product and sells these products to earn a profit Examples?   4. Non-Profit Organization Carriers on activities to meet social needs and not for a financial profit

Forms of Business Ownership: 1. Sole Proprietorship A business owned by an individual Examples?  2. Partnership A business owned by more than one individual Examples?  3. Corporation Various individuals own shares of a business