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Ch 1.1
What is accounting:

1. Measures business activities

2. Process data into reports

3. Communicates results to decision makers

Accounting helps companies, their shareholders, and management make decisions:

1. Sources of funding and capital

2. Costing and pricing

3. Analyze the performance of various business groups within the company

Acct used by:

1. Individuals

2. Investors & creditors

3. Regulatory bodies (SFC, IRD)

Two kinds of accounting:

1. Financial accounting (For decision makers outside the company)

a. Investors

b. Creditors

c. Government agencies

d. The public

2. Managerial accounting (For managers inside the company)

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 a. Budget

b. Forecasts

c. Projections

Various forms of business organization

1. Proprietorship

a. Single owner

b. Tend to be small retail stores or solo providers of professional services

c. Personally liable for all business’s debts

d. Distinct entity, separate from its proprietor for accounting purposes

2. Partnership

a. Two or more parties as co-owners

b. Income & losses “flow through” to partners

c. Many are small or medium-sized companies

d. General partnerships have mutual agency and limited liability

e. In limited partnerships, only liable up to the investment put in

3. Corporation

a. Own by shareholders/stockholders

b. Able to raise large sums of capital by issuing shares

c. Legally distinct from its owners

d. Shareholders have no personal obligation for the corporation’s debts, limited

liability

e. Shareholders elect/appoint board of directors, which

i. Set policies

ii. Splint officers

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 Accounting standards

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