1. Chapter 1 An Introduction to the Role of
Accounting in the Business World

2. Class Suggestions Read the chapter before class
Spend time on the homework
Ask questions during class
Do a little bit each day
Accounting can be fun!
Chapter 1

3. Chapter 1: Objectives
What are the major types of Business Entities,their legal forms and key internal functions?
How do accountants communicate financial information to decision-makers?
What system collects internal financial data?
What and who make up the accounting profession?
What does the future hold for accounting?
Chapter 1

4. Business Entities Service Manufacturing Merchandising Wholesalers
Retailers
Chapter 1

5. Legal Forms of Businesses
Sole proprietorship
Partnership
Corporation
Chapter 1

6. Financial or Managerial?
External users
Rigid rules
Historical perspective
Aggregate information
Quantitative information
Internal users
Flexible format
Future perspective
Detailed information
Quantitative and qualitative information
Chapter 1

7. Hierarchy of Accounting
Chapter 1

8. Financial Statements Balance sheet Income statement
Statement of cash flows
Statement of owners’ equity
Chapter 1

9. Balance Sheet Assets= Liabilities + Owners’ Equity At a Point in Time
Consolidates Activity
Chapter 1

10. Income Statement Revenues minus expenses For a period of time
Measures gains and losses
Chapter 1

11. Statement of Cash Flows
Details all cash inflows and outflows
For a period of time
Like a checkbook
Chapter 1

12. Statement of Owners’ Equity
Changes in the owners’ equity
For a period of time
Owners’ claim on the assets
Chapter 1

13. Other Annual Report Components
Footnotes
Management discussion & analysis
Independent auditors’ report
Chapter 1