1. Accounting Defined

2. What is accounting? The systematic and comprehensive recording of financial transactions pertaining to a business. In layman's terms it is the language of business

3. Language = Communication I had positive cash flow in spite of the sluggish economy My tax bill was $179,000 this past year I make four different types of shoes. Flip Flops are the most profitable.

4. Why does accounting exist? To help people make decisions What kind of decisions does accounting help people make?

5. It Depends Two groups Internal users (People inside the organization) External users (People outside the organization)

6. It Depends Two key types of accounting Financial (used by external users) Management (used by internal users)

7. Managerial Accounting Designed to help people inside the business make decisions No rules

8. Designed to help people outside the business make decisions Financial Accounting Creditors Investors Governments Suppliers Labor/Unions Customers

9. Designed to help people outside the business make decisions Financial Accounting Multi- purpose reporting Follows Rules GAAPGAAP

10. Accounting Assumptions Business Entity- Reports only pertain to the business, not the owners personal holdings Accounting Period- A period of time covered by an accounting report Going concern- An assumption that a business is able to sustain operations.

11. * Language of accounting Summary of Accounting * Includes people and processes * Captures, summarizes and reports information about a business * Helps people make decisions * Two key areas discussed Managerial Accounting Financial Accounting

12. Questions 2) What area of accounting prepares multi-purpose reports? 1) Why does accounting exist? 3) What rules are followed in preparing financial accounting reports?