 Objectives  Define Accounting  Identify how accounting is used to support a business  Understand why accounting is important  Identify the different types of business and how they are affected by accounting

 What do you think accounting is?  Accounting defined: Accounting is the process of keeping track of a business’ finances.

 Service Business ◦ Restaurant, Carwash, hair salon  Manufacturing ◦ appliances, automobiles, cellular phones  Merchandising Business ◦ Grocery Stores, Clothing Stores, Auto parts Store

 Accounting includes logging financial transactions, running reports based on the transactions, and interpreting the reports to understand a company’s worth. Types of financial transactions: Selling of merchandise Purchasing of equipment Collection of money Paying bills Types of reports a business uses: Balance Sheet Income Statement Capital Statement Cash Flows

 Accounting shows: How much money the business has How much others owe to the business How much the business owes others

Who uses accounting information: Business Owners Managers of various operations Stakeholders How accounting information is used: Create Budgets and make business decisions Measure performance Make investment decisions

 Name the person or group that would use accounting information to make the following decisions: 1. Whether or not to invest money into purchasing another building. 2. How much money should be budgeted toward buying supplies this month? 3. How well the Sales department has performed for the month. 4. How to cut printing costs. 5. Whether or not to purchase new equipment.

 Generally Accepted Accounting Principles (GAAP) Guides a business as to what should be included when creating and sharing a business’ financial information. This is to ensure consistency in the business community as well as to protect those who use this information to make economic decisions.

How does accounting impact a business’ taxes?  A business needs to properly report and pay the following: Local tax State tax (e.g. Sales tax) City = 1% Type A sales tax =.25% Type B sales tax =.25% County =.5% State = 6.25% Federal tax Taxes withheld from employees’ paychecks Low-4.5% Middle-17% Upper-24.6%

 Accounting affects the different business types because:  Taxes are handled differently based on the type of business  Affects the business’ ability to gain money or capital  Can affect the initial and recurring costs of the business

Sole Proprietorship – A business that is owned by one person who typically runs and manages the business. In a sole proprietorship, the owner is personally liable for the business. Partnership –Two or more people who share the ownership of a single business. Percentages are not always split equally. Corporation– An organization that is made up of many owners who are not normally in the decision-making and operations of the business, but they have an interest in the company. In a corporation, investors are protected from personal liability. Limited Liability Company (LLC) – A business type that combines the benefits of partnership’s flexibility and a corporation’s protection. Members of an LLC are only liable for what they invested in the company and no more.

Summary  Define Accounting  Identify how accounting is used to support a business  Understand why accounting is important  Identify the different types of business and how they are affected by accounting