Copyright 2006 Pearson Education Canada Inc. 11-1
Copyright 2006 Pearson Education Canada Inc. 1-2 Outline What is Accounting? Users of Accounting Information Types of Accounting Organizations Business Transactions Forms of Legal Organization Accounting as an Information System Financial Statements – Output of the Accounting System
Copyright 2006 Pearson Education Canada Inc. 1-3 What is Accounting? A system for collecting, summarizing, analyzing, and reporting in monetary terms information about an organization
Copyright 2006 Pearson Education Canada Inc. 1-4 SYSTEM COLLECTING SUMMARIZING ANALYZING REPORTING MONETARY TERMS INFORMATION ORGANIZATION
Copyright 2006 Pearson Education Canada Inc. 1-5 Users of Accounting Information OTHER USERS CREDITORS INVESTORS EMPLOYEES OWNERS GOVERNMENT MAIN USER OF ACCOUNTING INFORMATION
Copyright 2006 Pearson Education Canada Inc. 1-6 Types of Accounting Financial Accounting Managerial Accounting EXTERNAL USES OF ACCOUNTING INFORMATION INTERNAL USES OF ACCOUNTING INFORMATION
Copyright 2006 Pearson Education Canada Inc. 1-7 Organizations Distinct Entities A person or persons with stated purposes Operating in an environment by interacting with other organizations
Copyright 2006 Pearson Education Canada Inc. 1-8 Business Transactions Interaction between organizations Quid Pro Quos Equal Exchange of values Values Received Equal Values Given Services = Payment
Copyright 2006 Pearson Education Canada Inc. 1-9 Forms of Legal Organization Sole Proprietorships Partnerships Corporations
Copyright 2006 Pearson Education Canada Inc Forms of Legal Organization : Sole Proprietorships One owner No sharing of profits Simple Questions of taxation Limited life Unlimited liability
Copyright 2006 Pearson Education Canada Inc Forms of Legal Organization : Partnerships Easy to organize Combination of capital and experience Questions of taxation Limited life Unlimited liability Mutual agency
Copyright 2006 Pearson Education Canada Inc Forms of Legal Organization: Corporations Limited liability Unlimited life Easy to transfer ownership Access to capital for expansion Double taxation More government control
Copyright 2006 Pearson Education Canada Inc Accounting as an Information System INPUT ---- PROCESS ---- OUTPUT SOURCE ACCOUNTING INFORMATION DOCUMENTS CYCLE TO MANAGEMENT Financial Statements
Copyright 2006 Pearson Education Canada Inc Financial Statements-Output of the Accounting System Source Document Process Output Balance Sheet Income Statement Statement of Cash Flow