Introduction to Accounting Chapter 1 Introduction to Accounting

Profession of Accounting Accountants employed by a business firm or a not-for-profit organization are said to be engaged in private accounting. Accountants and their staff who provide services on a fee basis are said to be employed in public accounting.

Generally Accepted Accounting Principles (GAAP)

The business entity concept limits the economic data in the accounting system to data related directly to the activities of the business. The cost concept is the basis for entering the exchange price, or cost of an acquisition in the accounting records.

The objectivity concept requires that the accounting records and reports be based upon objective evidence. The unit-of-measure concept requires that economic data be recorded in dollars.

The Accounting Equation Assets = Liabilities + Owner’s Equity The resources owned by a business

The Accounting Equation Assets = Liabilities + Owner’s Equity The rights of the creditors, which represent debts of the business

The Accounting Equation Assets = Liabilities + Owner’s Equity The rights of the owners

What is a business transaction? A business transaction is an economic event or condition that directly changes an entity’s financial condition or directly affects its results of operations.