1. 1 McGraw-Hill Ryerson College Accounting First Canadian Edition Price Haddock Brock Hahn Reed

2. 2 The Accounting Cycle

3. ACCOUNTING: The Language of Business CHAPTER 1 3

4. ACCOUNTING is “the Language of Business” is used to gather and communicate financial information about an organization. 4

5. ACCOUNTING this information is used by owners and managers to make decisions that will build and improve the business 5

6. 6 OBJECTIVE 1 Define Accounting OBJECTIVE 1 Define Accounting

7. ACCOUNTING DEFINED The process by which financial information about a business is recorded, classified, summarized, interpreted, and communicated to owners, managers, and other interested parties. 7

8. OBJECTIVE 2 Explain why it is important to study accounting 8

9. THREE PROFESSIONAL ACCOUNTING BODIES IN CANADA. Certified General Accountants of Canada (CGA) Society of Management Accountants of Canada (CMA) Canadian Institute of Chartered Accountants (CA) 9

10. FINANCIAL INFORMATION NEEDED How much cash does the business have? How much money do customers owe the business? What is the cost of the merchandise sold? 10

11. How much did the volume of sales increase? What is the amount owed to suppliers? How much profit has the firm made? FINANCIAL INFORMATION NEEDED (Continued) 11

12. OBJECTIVE 3 Identify who needs to receive financial information 12

13. Owners and Managers Suppliers Banks Tax Authorities Regulatory Agencies and Investors Customers Employees and Unions 13 USERS OF FINANCIAL INFORMATION

14. OBJECTIVE 4 Describe generally accepted accounting principles 14

15. Generally Accepted Accounting Principles GAAP 15

16. Include specific rules, practices and procedures as well as broad underlying concepts and conventions. GAAP 16

17. Transactions and events are recognized in financial statements at the amount of cash or cash equivalents paid or received when they took place. Historical Cost Basis of Measurement 17

18. USE OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES To ensure that generally accepted accounting principles are followed by publicly owned corporations, the stock exchange requires that financial information, in the form of financial statements, be submitted annually. 18

19. OBJECTIVE 5 Compare the three types of business entities 19

20. ENTITY Anything having its own separate identity, such as an individual, a town, a university, or a business. 20

21. The concept of keeping a firm’s financial records separate from the owner’s personal financial records. ENTITY ASSUMPTION 21

22. A business entity owned by one person. Ends when the owner quits or dies. Owner is legally responsible for the debts and taxes of the business. SOLE PROPRIETORSHIP 22 Mike’s Bike Shop

23. A business entity owned by two or more people who are legally responsible for the debts and taxes of the business. Ends when one of the partners leave the partnership. PARTNERSHIP 23

24. A publicly or privately owned business. Owned by stockholders. Does not end when ownership changes. Shareholders are not responsible for the debts or taxes of the corporation. Financial affairs of the shareholders must be kept separately from the corporation. CORPORATION 24

25. OBJECTIVE 6 State the steps in the accounting cycle 25

26. ACCOUNTING CYCLE 26 1. RECORD 2. CLASSIFY 3. SUMMARIZE4. INTERPRET 5. COMMUNICATE

27. 1.RECORD in journal 2.CLASSIFY in a ledger 3.SUMMARIZE in financial statements 4.INTERPRET 5.COMMUNICATE 27 ACCOUNTING CYCLE All transactions