1. Copyright  2006 Pearson Education Canada Inc. 11-1

2. 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

3. 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

4. Copyright  2006 Pearson Education Canada Inc. 1-4 SYSTEM COLLECTING SUMMARIZING ANALYZING REPORTING MONETARY TERMS INFORMATION ORGANIZATION

5. Copyright  2006 Pearson Education Canada Inc. 1-5 Users of Accounting Information OTHER USERS CREDITORS INVESTORS EMPLOYEES OWNERS GOVERNMENT MAIN USER OF ACCOUNTING INFORMATION

6. 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

7. 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

8. 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

9. Copyright  2006 Pearson Education Canada Inc. 1-9 Forms of Legal Organization Sole Proprietorships Partnerships Corporations

10. Copyright  2006 Pearson Education Canada Inc. 1-10 Forms of Legal Organization : Sole Proprietorships One owner No sharing of profits Simple Questions of taxation Limited life Unlimited liability

11. Copyright  2006 Pearson Education Canada Inc. 1-11 Forms of Legal Organization : Partnerships Easy to organize Combination of capital and experience Questions of taxation Limited life Unlimited liability Mutual agency

12. Copyright  2006 Pearson Education Canada Inc. 1-12 Forms of Legal Organization: Corporations Limited liability Unlimited life Easy to transfer ownership Access to capital for expansion Double taxation More government control

13. Copyright  2006 Pearson Education Canada Inc. 1-13 Accounting as an Information System INPUT ---- PROCESS ---- OUTPUT SOURCE ACCOUNTING INFORMATION DOCUMENTS CYCLE TO MANAGEMENT Financial Statements

14. Copyright  2006 Pearson Education Canada Inc. 1-14 Financial Statements-Output of the Accounting System Source Document Process Output Balance Sheet Income Statement Statement of Cash Flow