accounting and business environment

PowerPoint to accompany

Chapter 1
Accounting and the business environment Learning Objectives
1. Use accounting vocabulary
2. Apply accounting concepts and principles
3. Use the accounting equation
4. Analyse business transactions
5. Prepare the financial statements
6. Evaluate business performance

Horngren, Best, Fraser, Willett: Accounting 6e © 2010 Pearson Australia

Objective 1

Use accounting vocabulary.

Horngren, Best, Fraser, Willett: Accounting 6e © 2010 Pearson Australia

Accounting... is an information system that... measures business activities, processes information, and... communicates financial information.
And is called the language of business.
Horngren, Best, Fraser, Willett: Accounting 6e © 2010 Pearson Australia

Accounting Information and
Its Users
External users make decisions about the entity.

Internal users make decisions for the entity.

e.g. Investors

e.g. Management

This is
Financial
Accounting

This is
Management
Accounting

Horngren, Best, Fraser, Willett: Accounting 6e © 2010 Pearson Australia

Types of Business
Organisations
Proprietorships
(sole traders)
Partnerships
Companies

Horngren, Best, Fraser, Willett: Accounting 6e © 2010 Pearson Australia

Proprietorships
 What are some advantages?
– total undivided authority
– no restrictions on type of business – must be legal
 What are some disadvantages?
– unlimited liability
– limitation on size – fundraising power

Horngren, Best, Fraser, Willett: Accounting 6e © 2010 Pearson Australia

Partnerships
 What are some advantages?
– better credit standing - possibly
– more brain power, but consultation with partners required
 What are some disadvantages?
– unlimited personal liability for general partners – need for written partnership agreement

Horngren, Best, Fraser, Willett: Accounting 6e © 2010 Pearson Australia

Companies

–
–
–

–
–

What are some advantages?