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Service Businesses
- Provide services rather than products to customers.
- Delta Air Lines (transportation service)
- The Walt Disney Company (Entertainment Service)
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Merchandising Businesses
- Sell products they purchase from other businesses to customers
- Wal-mart (general merchandise)
- Amazon.com ( Internet books, music, videos)
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Manufacturing businesses
- Change basic inputs into products that are sold to customers.
- Ford Motor Co. (Cars, trucks, vans)
- Dell Inc. (personal computers)
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Accounting
provides reports to users about the economic activities and condition of a business. "language of business"
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Managerial accounting
Provides internal users with information
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Financial accounting
Provides external users with information.
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GAAP
Generallly Accepted Accounting Principles. What accountants follow when making financial statements.
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FASB
Financial Accounting Standards Board. Has the primary responsibility for developing accounting principles. The FASB publishes Statements of financial Accounting Standards as well as interpretations of theses standards.
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SEC
Securities and Exchange Commission. An agency of the U.S. government, has authority over the accounting and financial disclosures for companies whose shares of ownership are traded and sold to the public.
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IASB
International Accounting Standards Board. The IASB issues International Financial Reporting Standards. Significant differences currently exist between FASB and IASB accounting principles.
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Business Entity Concept
Limits the economic data in an accounting system to data related directly to the activitiesof the business. In other words the business is viewed as an entity separate from its owners, creditors, or other businesses.
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Proprietorship
- is owned by one individual
- Easy and cheap to organixe
- Resources are limited to those of the owner
- Used by small businesses
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Partnership
Is owned by two or more individuals
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The Accounting Equation
Assets = Liabilities + Owners Equity
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Capital Stock
stock issued to owners (stockholders), such as Chris Clark, is referred to as capital stock.
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Stockholders Equity
- The owners equity in a corporation.
- Assets = Stockholders Equity
- Cash = Capital Stock
- 25,000
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Cost Concept
Amounts are initially recorded in the accounting records at their cost or purchase price.
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Objectivity concept
requires that the amounts recorded in the accounting records be based on objective evidence.
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Unit measure concept
Requires that economic data be recorded in dollars. Money is a common unit of measurement for reporting financial data and reports.
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Asset
The resources owned by a business.
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Liabilities
The rights of creditors are the debts of the business.
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Owners Equity
The rights of the owners .
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Account receivable
A claim against the customer. An account receivable is an asset and the revenue is earned and recorded as if cash had been received. When customers pay their accounts, cash increases and AR decreases.
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Expenses
Spent cash or used up other assets in earning revenue. Assets used in the process of earning revenue are called....
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