1 - 1 © 2005 Accounting 1/e, Terrell/Terrell The Business Environment Chapter 1

1 - 2 © 2005 Accounting 1/e, Terrell/Terrell Learning Objective 1 Define business activity and the profit motive.

1 - 3 © 2005 Accounting 1/e, Terrell/Terrell Business Activity Business is the process of producing and distributing goods and services to those who desire them. Not-for-profit firms are generally benevolent organizations.

1 - 4 © 2005 Accounting 1/e, Terrell/Terrell Factors of Production Factors of production Natural resources HumanresourcesPhysicalcapital Entrepreneurship

1 - 5 © 2005 Accounting 1/e, Terrell/Terrell Business Plan Businessplan Businessgoals Action plan to achieve goals

1 - 6 © 2005 Accounting 1/e, Terrell/Terrell Learning Objective 2 Distinguish among the three major types of business activities and hybrid type businesses.

1 - 7 © 2005 Accounting 1/e, Terrell/Terrell Types of Business Activities Manufacturing Merchandising Service Hybrid WholesaleRetail

1 - 8 © 2005 Accounting 1/e, Terrell/Terrell Learning Objective 3 Distinguish among the three basic forms of business organizations and describe the advantages and disadvantages of each.

1 - 9 © 2005 Accounting 1/e, Terrell/Terrell Proprietorships Partnerships Corporations Forms of Business Organizations

© 2005 Accounting 1/e, Terrell/Terrell Sole Proprietorship It is a business owned by a single individual. It is easy and inexpensive to organize. Independence

© 2005 Accounting 1/e, Terrell/Terrell Sole Proprietorship Unlimited liability Limited access to capital Long hours

© 2005 Accounting 1/e, Terrell/Terrell Partnership It is a business with two or more owners. It is inexpensive and easy to organize. PartnershipAgreement

© 2005 Accounting 1/e, Terrell/Terrell Partnership Unlimited liability Conflict

© 2005 Accounting 1/e, Terrell/Terrell Partnership Two new partnership forms:

© 2005 Accounting 1/e, Terrell/Terrell Corporation Stock Board of directors Shareholder Dividend It is a separate legal entity from its owners.

© 2005 Accounting 1/e, Terrell/Terrell Corporation A new type of corporation is called a limited liability company. It avoids double taxation.

© 2005 Accounting 1/e, Terrell/Terrell Learning Objective 4 Identify the stakeholders of a business and describe social responsibility.

© 2005 Accounting 1/e, Terrell/Terrell Business Stakeholders Stakeholders

© 2005 Accounting 1/e, Terrell/Terrell Business Stakeholders Customers Stockholders Employees Competitors GovernmentCommunity

© 2005 Accounting 1/e, Terrell/Terrell Competitors Predatorypricing Pricediscrimination Pricefixing Monopolisticpractices

© 2005 Accounting 1/e, Terrell/Terrell Learning Objective 5 Identify the attributes and evaluate the importance of business reputation and ethical behavior.

© 2005 Accounting 1/e, Terrell/Terrell Business Reputation and Ethical Behavior Corporateculture Innovation Product and service quality Financialstrength TalentedpeopleSocialresponsibility

© 2005 Accounting 1/e, Terrell/Terrell Learning Objective 6 Compare and contrast the relationships between a business and its employees, other businesses, consumers, and government.

© 2005 Accounting 1/e, Terrell/Terrell Business Relationships A business must maintain ethical and appropriate relationships with: Other businesses Their customers Their employees Governments

© 2005 Accounting 1/e, Terrell/Terrell Learning Objective 7 Discuss the effect of e-commerce on business practices.

© 2005 Accounting 1/e, Terrell/Terrell E-Commerce In the 1990s, the introduction of the World Wide Web brought the information technology of the Internet into homes and businesses. Business transactions that are conducted through the Internet and other electronic media are called e-commerce.

© 2005 Accounting 1/e, Terrell/Terrell E-Commerce Communication time declines from days to minutes. Web site catalogs save color, printing costs, and mailing fees.

© 2005 Accounting 1/e, Terrell/Terrell Learning Objective 8 Define accounting and distinguish among the different roles of accountants.

© 2005 Accounting 1/e, Terrell/Terrell Accounting in the Business Environment Accounting is a system for analyzing and recording business transactions. Internal decision makers External decision makers

© 2005 Accounting 1/e, Terrell/Terrell Managementaccounting Financialaccounting Main Types of Accounting An accountant is an information specialist.

© 2005 Accounting 1/e, Terrell/Terrell Development of the Accounting Profession Securities Act of 1933 Securities Exchange Act of 1934 Securities and Exchange Commission

© 2005 Accounting 1/e, Terrell/Terrell Development of the Accounting Profession Financial Accounting Standards Board (FASB)… is the organization principally responsible for establishing accounting rules in the United States.

© 2005 Accounting 1/e, Terrell/Terrell Development of the Accounting Profession What are the standards for financial reporting? Generally accepted accounting principles International accounting standards

© 2005 Accounting 1/e, Terrell/Terrell Accountants’ Ethical Standards Sarbanes-Oxley Act of 2002 Certified Public Accountant (CPA)

© 2005 Accounting 1/e, Terrell/Terrell Accountants’ Roles AssuranceservicesIndependence AttestationAuditing

© 2005 Accounting 1/e, Terrell/Terrell Accountants’ Roles Financial statement audit Internal control structure TaxationConsultingservicesManagementaccounting

© 2005 Accounting 1/e, Terrell/Terrell End of Chapter 1