Accounting and Business Chapter 1

What is Accounting? 1. Gathering financial information about the activities of a business 2. Preparing and collecting permanent records 3. Rearranging, summarizing and classifying financial information into useable form 4. Preparing reports 5. Establishing controls to promote accuracy and honesty

Why Study Accounting 1. Accounting on the job 2. Accounting in daily life 3. Owning your own business 4. Accounting as a profession

Types of Businesses  Service  Sells a service to the public  No products as main form of business  Merchandising  Buys goods and resells them at higher price  Manufacturing  Buys raw materials converts them in new product; sells for profit  Non-profit Organization  May carry on activities to meet social needs and not for financial profit

Forms of Business Ownership  Sole proprietorship  One owner  Partnership  Two or more owners  Corporation  Owned by shareholders

Nature of Accounting  Includes a wide variety of functions 1. Routine Daily Activities 1. Occur in same way nearly every day of year i.e. processing bills, preparing cheques 2. Periodic Accounting Activities 1. Occur at regular intervals i.e. payroll cheques every two weeks, prepare financial reports 3. Miscellaneous Activities 1. Some activities cannot be predicted

The Accounting Cycle  Activities are performed in equal periods known as fiscal periods  Length of a fiscal period = one year  These activities occur each year in a particular order and are repeated period after period

The Accounting Cycle Pg. 6-7

Professional Accountants  CA = Chartered Accountant  CMA = Certified Management Accountant  Have now merged into one unified group  = CPA Charted Professional Accountant  CGA = Certified General Accountant  Will unify with CPA September 2015  In Canada will be one unified profession

Roles in Accounting Bookkeeper or accounting clerk  Ensuring transactions are recorded properly with proper documents  Recording accounting entries  Payroll calculations and preparing payroll cheques  Banking transactions

Roles in Accounting Accountant  Responsible for maintaining entire accounting system  Developing strategies to ensure accuracy  Ensuring standards (IFRS formally GAAP) are followed  Interpreting data  Preparing reports  Working with management regarding business decisions  Supervising all accounting employees