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4. The accounting system produces information used by businesses to make decisions.
Glencoe Accounting
Glencoe Accounting
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

5. Describe profit, risk-taking, and entrepreneurs.
Describe service, merchandising, and manufacturing businesses.
Compare the sole proprietorship, partnership, and corporate forms of businesses.
List the advantages and disadvantages of each form of business organization.
Describe the purpose of accounting.
Explain financial and management accounting.
Describe the three basic accounting assumptions.
Glencoe Accounting
Glencoe Accounting
Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

6. Key Terms free enterprise system profit loss entrepreneur capital
Exploring the World of Business
Section 2.1
Key Terms
free enterprise system
profit
loss
entrepreneur
capital
service business
merchandising business
manufacturing business
sole proprietorship
partnership
corporation
charter
Glencoe Accounting

7. The Environment of Business
Exploring the World of Business
Section 2.1
free enterprise system
The activities that a person does well.
Free Enterprise System
profit
The amount of money earned over and above the amount spent to keep the business operating.
Profit
Loss
loss
When a business spends more money than it earns.
Glencoe Accounting

8. The Environment of Business
Exploring the World of Business
Section 2.1
Operate at a profit
What a business needs to survive
An individual willing to take the risk
Glencoe Accounting

9. The Environment of Business
Exploring the World of Business
Section 2.1
Inventors
entrepreneur
A person who transforms ideas for products or services into real-world businesses.
Investors
Entrepreneurs
Roles in a Business
Managers
Employees
Glencoe Accounting

10. The Environment of Business
Exploring the World of Business
Section 2.1
Glencoe Accounting

11. The Environment of Business
Exploring the World of Business
Section 2.1
Self-Starters
Organizational Skills
Traits of
Entrepreneurs
Accounting Skills
Marketing Knowledge
Glencoe Accounting

12. The Environment of Business
Exploring the World of Business
Section 2.1
Do you have good writing and speaking skills?
Are you creative or mechanical?
Entrepreneur – Who, Me?
Are you a self-starter?
Do you have accounting or marketing skills?
Glencoe Accounting

13. Types and Forms of Businesses
Exploring the World of Business
Section 2.1
Three Types of Business Operations
Service
Business
Merchandising
Business
Manufacturing
Business
merchandising business
A business that buys finished products and resells them to individuals or other businesses.
manufacturing business
A business that buys raw materials, uses labor and machinery to transform them into finished products, and sells the finished products to individuals or other businesses.
service business
A business that provides a needed service for a fee.
Glencoe Accounting

14. Types and Forms of Businesses
Exploring the World of Business
Section 2.1 $
All types of businesses need capital to begin.
capital
Money that investors, banks, or business owners supply for a business to begin.
Glencoe Accounting

15. Types and Forms of Businesses
Exploring the World of Business
Section 2.1
Three Types of Business Organization
Sole Proprietorship
Partnership
Corporation
sole proprietorship
A business owned by one person.
partnership
A business owned by two or more persons.
corporation
A business recognized by law to have a life of its own.
Glencoe Accounting

16. Types and Forms of Businesses
Exploring the World of Business
Section 2.1
Glencoe Accounting

17. Types and Forms of Businesses
Exploring the World of Business
Section 2.1
Glencoe Accounting

18. Types and Forms of Businesses
Exploring the World of Business
Section 2.1
A corporation must obtain a charter.
charter
Legal permission to operate.
Glencoe Accounting

19. Key Terms free enterprise system profit loss entrepreneur capital
Exploring the World of Business
Section 2.1
Key Terms
free enterprise system
profit
loss
entrepreneur
capital
service business
merchandising business
manufacturing business
sole proprietorship
partnership
corporation
charter
Glencoe Accounting

20. Key Terms accounting system manual accounting system
Accounting: The Universal Language of Business
Section 2.2
Key Terms
accounting system
manual accounting system
computerized accounting system
GAAP
financial reports
financial accounting
management accounting
business entity
accounting period
going concern
Glencoe Accounting

21. When accounting information is processed by hand.
The Accounting System
Accounting: The Universal Language of Business
Section 2.2
Manual Accounting System
Two types of accounting systems
Computerized Accounting System
accounting system
Designed to collect, document, and report on financial transactions affecting the business.
manual accounting system
When accounting information is processed by hand.
computerized accounting system
When accounting information is processed by recording it into a computer.
Glencoe Accounting

22. GAAP (Generally Accepted Accounting Principles)
The Accounting System
Accounting: The Universal Language of Business
Section 2.2
What Is
GAAP?
GAAP (Generally Accepted Accounting Principles)
The set of rules that all accountants use to prepare financial reports.
Glencoe Accounting

23. financial reports? The Accounting System What Are financial reports
Accounting: The Universal Language of Business
Section 2.2
What Are
financial reports?
financial reports
Documents that present summarized information about the financial status of a business.
Glencoe Accounting

24. Using Accounting Reports for Making Business Decisions
Accounting: The Universal Language of Business
Section 2.2
Individuals outside the business who have an interest in the business
Two groups that use accounting reports
Individuals inside the business
Glencoe Accounting

25. Using Accounting Reports for Making Business Decisions
Accounting: The Universal Language of Business
Section 2.2
Those interested in the financial accounting reports of a business include:
Local, state, and federal government
Employees, consumers, and competitors
Investors
financial accounting
The type of accounting that focuses on reporting information to external users.
Glencoe Accounting

26. Using Accounting Reports for Making Business Decisions
Accounting: The Universal Language of Business
Section 2.2
Purchasing decisions
Hiring decisions
Production decisions
Payments Plan
Sales Plan
Collections Plan
Management accounting reports are prepared for managers involved in:
management accounting
The type of accounting that focuses on reporting information to management; often referred to as accounting for internal users of accounting information.
Glencoe Accounting

27. Accounting Assumptions
Accounting: The Universal Language of Business
Section 2.2
GAAP Assumptions
business entity
The accounting assumption that a business exists independently of its owner’s personal holdings. The accounting records and reports are maintained separately and contain financial information related only to the business.
Business entity
Accounting period
Going concern
Glencoe Accounting

28. Accounting Assumptions
Accounting: The Universal Language of Business
Section 2.2
GAAP Assumptions
accounting period
The period of time covered by an accounting report.
Business entity
Accounting period
Going concern
Glencoe Accounting

29. Accounting Assumptions
Accounting: The Universal Language of Business
Section 2.2
GAAP Assumptions
Business entity
Accounting period
going concern
The accounting assumption that a business is expected to operate indefinitely.
Going concern
Glencoe Accounting

30. Step 1 Step 2 Step 3 Question 1
DePalm Pizza had the following cash transactions yesterday.
Receipts (money in): Checks: $650.00, Cash $500.00
Expenditures (money out): Gas and oil for delivery vehicle $75.98, supplies $477.50, salaries $380.00, and miscellaneous expenditures $
Did DePalm have a “profit” or “loss” for the day?
Step 1
Calculate the total receipts.
$ $ = $1,150
Step 2
Calculate the total expenditures.
$ $ $ $ = $1,057.24
Step 3
Calculate the net profit (loss).
$1, $1, = $92.76 profit (Receipts exceed expenditures)
Glencoe Accounting

31. Question 2
Sole proprietorship is the most popular form of business ownership, yet very few large businesses are sole proprietorships. Give at least two reasons to explain this.
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

32. Thank you and See You Next Week at the Same Time, Take Care
Atef Abuelaish