1. Use accounting vocabulary. 2. Apply accounting concepts and principles to business situations. 3. Use the accounting equation to describe an organisation’s financial position. 4. Use the accounting equation to analyse business transactions. 5. Preparation of financial statements.
Accounting... is an information system that...
Use accounting vocabulary measures business activities, processes information, and... communicates financial information.
Users of Accounting Information
is called the language of business. External users make decisions about the entity. Internal users make decisions for the entity.
Fields of Accounting
Types of Business Organizations
Proprietorships (sole traders)
Financial Accounting Partnerships Management Accounting
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 – fund raising power
What are some advantages? – better credit standing – possibly – more brain power but consultation with power, partners required What are some disadvantages? – unlimited personal liability for partners – need for written partnership agreement
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What are some advantages? – separate legal existence – limited liability of shareholders (owners) – transferability of ownership relatively easy What are some disadvantages? – separation of ownership and control – extensive governmental regulation
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Objective 2 Apply accounting concepts and principles to business situations.
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Generally Accepted Accounting Principles
The Entity Concept Example
Assume that Jan decides to open up a petrol station and coffee shop. The petrol station made $250,000 in