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Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. The accounting system produces information used by businesses to make decisions. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Exploring the World of Business The Environment of Business Free Enterprise System ProfitLoss free enterprise system People are free to engage in careers or create businesses based on their own individual interests. profit The amount of money earned over and above the amount spent to keep the business operating. loss When a business spends more money than it earns. Section 2.1 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Exploring the World of Business Types and Forms of Businesses Section 2.1 Three Types of Business Operations Service Business Merchandising Business Manufacturing Business service business A business that provides a needed service for a fee. merchandising business A business that buys finished products and resells them to individuals or other businesses. manufacturing business A business that buys raw materials, uses labor and machinery to transform them into finished products, and sells the finished products to individuals or other businesses. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Exploring the World of Business The Environment of Business Section 2.1 What a business needs to survive Operate at a profit An individual willing to take the risk Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Exploring the World of Business The Environment of Business Section 2.1 Roles in a Business Inventors Investors EmployeesManagers Entrepreneurs entrepreneur transforms ideas for products or services into real-world businesses. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Exploring the World of Business The Environment of Business Section 2.1 Roles in a Business Inventors Investors EmployeesManagers Entrepreneurs Inventor Someone who created something new by use of ingenuity or imagination Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Exploring the World of Business The Environment of Business Section 2.1 Roles in a Business Inventors Investors EmployeesManagers Entrepreneurs Investor Someone who provides money or resources to a business with the expectation of financial gain Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Exploring the World of Business The Environment of Business Section 2.1 Roles in a Business Inventors Investors EmployeesManagers Entrepreneurs Employee Someone who does the work for money Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Exploring the World of Business The Environment of Business Section 2.1 Roles in a Business Inventors Investors EmployeesManagers Entrepreneurs Manager Someone who directs Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Exploring the World of Business The Environment of Business Section 2.1 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Exploring the World of Business The Environment of Business Section 2.1 Traits of Entrepreneurs Self-StartersOrganizational Skills Marketing Knowledge Accounting Skills Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Exploring the World of Business Types and Forms of Businesses Section 2.1 $ All types of businesses need capital to begin. capital Money that investors, banks, or business owners supply for a business to begin. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting sole proprietorship A business owned by one person. partnership A business owned by two or more persons. corporation A business recognized by law to have a life of its own. Exploring the World of Business Types and Forms of Businesses Section 2.1 Three Types of Business Organization Sole Proprietorship PartnershipCorporation Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Exploring the World of Business Types and Forms of Businesses Section 2.1 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Exploring the World of Business Types and Forms of Businesses Section 2.1 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Exploring the World of Business Types and Forms of Businesses A corporation must obtain a charter (get permission from the state). Section 2.1 Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Problem 2-4 Glencoe Accounting BusinessServiceMerchandisingManufacturing International Business Machines (IBM) Gap Glendale Memorial Hospital Avis Rent A Car Ford Motor Co Bank of America Ace Hardware Michigan City Animal Hospital Office Depot Wal-Mart Stores Allstate Insurance U.S. Steel

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Accounting: The Universal Language of Business Section 2.2 The Accounting System Two types of accounting systems Manual Accounting System Computerized Accounting System accounting system Designed to collect, document, and report on financial transactions affecting the business. manual accounting system When accounting information is processed by hand. computerized accounting system When accounting information is processed by recording it into a computer. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Accounting: The Universal Language of Business Section 2.2 The Accounting System GAAP (generally accepted accounting principles) The set of rules that all accountants use to prepare financial reports. What Is GAAP? Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting The Accounting System Accounting: The Universal Language of Business Section 2.2 What are financial reports? financial reports Documents that present summarized information about the financial status of a business. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Using Accounting Reports for Making Business Decisions Accounting: The Universal Language of Business Section 2.2 Two groups that use accounting reports Individuals outside the business who have an interest in the business Individuals inside the business Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Using Accounting Reports for Making Business Decisions Accounting: The Universal Language of Business Section 2.2 Those interested in the financial accounting reports of a business include: Investors Local, state, and federal government Employees, consumers, and competitors financial accounting The type of accounting that focuses on reporting information to external users. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Using Accounting Reports for Making Business Decisions Accounting: The Universal Language of Business Section 2.2 Management accounting reports are prepared for managers involved in: management accounting The type of accounting that focuses on reporting information to management; often referred to as accounting for internal users of accounting information. Purchasing decisions Hiring decisions Production decisions Payments Sales Collections Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Accounting Assumptions Accounting: The Universal Language of Business Section 2.2 GAAP Assumptions Business entity Accounting period Going concern business entity The accounting assumption that a business exists independently of its owner’s personal holdings. The accounting records and reports are maintained separately and contain financial information related only to the business. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Accounting Assumptions Accounting: The Universal Language of Business Section 2.2 GAAP Assumptions Business entity Accounting period Going concern accounting period The period of time covered by an accounting report. going concern The accounting assumption that a business is expected to operate indefinitely. Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. DePalm Pizza had the following cash transactions yesterday. Receipts (money in): Checks: $650.00, Cash $ Expenditures (money out): Gas and oil for delivery vehicle $75.98, supplies $477.50, salaries $380.00, and miscellaneous expenditures $ Did DePalm have a “profit” or “loss” for the day? Glencoe Accounting Question 1 Step 1 Calculate the total receipts. $ $ = $1,150 Step 2 Calculate the total expenditures. $ $ $ $ = $1, Step 3 Calculate the net profit (loss). $1, $1, = $92.76 profit (Receipts exceed expenditures) Home

Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Question 2 Sole proprietorship is the most popular form of business ownership, yet very few large businesses are sole proprietorships. Give at least two reasons to explain this. 1.Sole proprietorships have the expertise of only the owner to call on. For example, the owner may be a great accountant but only a fair salesperson. 2.The business has the promise of only one owner to use to try to secure money from investors or lenders. 3.The owner bears all of the risk of loss, or unlimited liability. The owner could lose personal equity if the business fails. 4.The most talented potential employees would tend to prefer the job security of working in larger firms. Home

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