0. Unit 1 Introduction to Accounting
Chapter 1 You and the World of Accounting
Chapter 2 The World of Business and Accounting
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

1. Chapter 2 The World of Business and Accounting
What You’ll Learn
Describe profit, risk-taking, and entrepreneurs.
Describe service, merchandising, and manufacturing businesses.
Compare the sole proprietorship, partnership, and corporate forms of business.
List the advantages and disadvantages of each form of business organization.
Describe the purpose of accounting.
Explain financial and management accounting.
Describe three basic accounting assumptions.
Define the accounting terms introduced in this chapter.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

2. Chapter 2, Section 1 Exploring the World of Business
What Do You Think?
Why is the U.S. economy sometimes called a market economy?
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

3. Exploring the World of Business
SECTION 2.1
Main Idea
The United States has a free enterprise system with various kinds of businesses.
You Will Learn
about the environment of business.
the three types of business operations.
the three forms of business organization.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

4. Exploring the World of Business
SECTION 2.1
Key Terms
free enterprise system
profit
loss
entrepreneur
capital
service business
merchandising business
manufacturing business
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

5. Exploring the World of Business
SECTION 2.1
Key Terms
sole proprietorship
partnership
corporation
charter
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

6. Exploring the World of Business
SECTION 2.1
The Environment of Business
When you hear the word business, what do you think of?
In the U.S. we have a free enterprise system; people are free to produce goods and services and spend money as they wish.
A business can operate at a profit or a loss. If the revenues are greater than the costs, the money left over is profit. When costs are greater than revenues, the business operates at a loss.
In order to survive, a business must
operate at a profit, and
have an individual willing to take the risk to run it.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

7. Exploring the World of Business
SECTION 2.1
The Need for a Risk-Taker
In a business, inventors generate ideas, employees provide labor, and managers supervise. An entrepreneur transforms ideas into actual businesses.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

8. Exploring the World of Business
SECTION 2.1
Role of Entrepreneurs
There are pros and cons to being an entrepreneur.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

9. Exploring the World of Business
SECTION 2.1
Traits of Entrepreneurs
Most entrepreneurs:
are self-starters.
have organizational skills.
have marketing knowledge.
have accounting skills.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

10. Exploring the World of Business
SECTION 2.1
Entrepreneur – Who, Me?
Have you thought about owning a business? If so, you should ask yourself these questions:
Do you have good writing and speaking skills?
Are you creative or mechanical?
Are you a self-starter?
Do you have accounting or marketing skills?
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

11. Exploring the World of Business
SECTION 2.1
Types and Forms of Business
In a free enterprise system, an entrepreneur can choose the type and form of business to run.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

12. Exploring the World of Business
SECTION 2.1
Types of Business Operations
There are three types of business operations:
Service businesses provide services for fees.
Merchandising businesses buy and sell finished products.
Manufacturing businesses buy materials and make finished products.
Each type needs capital (money) from investors, banks, or business owners to begin.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

13. Exploring the World of Business
SECTION 2.1
Forms of Business Organization
Most U.S. businesses are organized in one of three ways:
sole proprietorship
partnership
corporation
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

14. Exploring the World of Business
SECTION 2.1
Sole Proprietorship
Sole means “single” and proprietor means “owner.” A sole proprietor is a single owner, but the operation may have many managers and employees.
There are advantages and disadvantages to being a sole proprietor.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

15. Exploring the World of Business
SECTION 2.1
Partnership
When two people enter into an agreement to operate a business as co-owners, a partnership is formed.
There are advantages and disadvantages to a partnership.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

16. Exploring the World of Business
SECTION 2.1
Corporation
A corporation often starts off as a sole proprietorship or partnership. In order to become a corporation an organization must obtain a charter (legal permission to operate).
There are advantages and disadvantages to a corporation.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

17. Exploring the World of Business
SECTION 2.1
Key Terms Review
free enterprise system
A system in which individuals are free to produce the goods and services they choose.
profit
The amount earned above the amount of expense incurred to keep the business operating.
loss
The result when a business spends more money than it earns.
entrepreneur
A person who transforms ideas for products or services into real-world business.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

18. Exploring the World of Business
SECTION 2.1
Key Terms Review
capital
Money supplied by investors, banks, or owners of a business.
service business
A business that provides a needed service for a fee.
merchandising business
A business that buys finished goods and resells them to individuals or other businesses.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

19. Exploring the World of Business
SECTION 2.1
Key Terms Review
manufacturing business
A business that buys raw materials and transforms them into financial products by using labor and machinery.
sole proprietorship
A business owned by one person.
partnership
A business owned by two or more persons, called partners, who agree to operate the business as co-owners.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

20. Exploring the World of Business
SECTION 2.1
Key Terms Review
corporation
A business organization recognized by law to have a life of its own.
charter
The legal permission, granted by a state, that gives a corporation certain rights and privileges and spells out the rules under which the corporation is to operate.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

21. Chapter 2 Review
CHAPTER 2
Answer 2
Sole proprietorships have the expertise of only the owner to call on. For example, the owner may be a great accountant but only a fair salesperson.
The business has the promise of only one owner to use to try to secure money from investors or lenders.
The owner bears all of the risk of loss, or unlimited liability. The owner could lose personal equity if the business fails.
The most talented potential employees would tend to prefer the job security of working in larger firms.
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

22. Resources Glencoe Accounting Online Learning Center English Glossary
Spanish Glossary
Glencoe Accounting Unit 1 Chapter 2 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.