1. Section 2Accounting: The Universal Language of Business What You’ll Learn  How the accounting system works.  Who uses financial accounting reports.  Who uses management accounting reports.  How accounting is used to help make business decisions.  What assumptions provide the foundation for accounting systems. What You’ll Learn  How the accounting system works.  Who uses financial accounting reports.  Who uses management accounting reports.  How accounting is used to help make business decisions.  What assumptions provide the foundation for accounting systems.

2. Why It’s Important Understanding accounting systems is the key to understanding business. Why It’s Important Understanding accounting systems is the key to understanding business. Section 2 Accounting: The Universal Language of Business (cont'd.) Key Terms  accounting system  manual accounting system  computerized accounting system  GAAP  financial reports Key Terms  accounting system  manual accounting system  computerized accounting system  GAAP  financial reports  financial accounting  management accounting  business entity  accounting period  going concern  financial accounting  management accounting  business entity  accounting period  going concern

3. The Accounting System Designed to collect, document, and report on financial transactions affecting the business. The Accounting System Designed to collect, document, and report on financial transactions affecting the business. Section 2 Accounting: The Universal Language of Business (cont'd.)  manual accounting system  computerized accounting system  generally accepted accounting principles (GAAP)  financial reports  manual accounting system  computerized accounting system  generally accepted accounting principles (GAAP)  financial reports

4. How the Accounting System Works Section 2 Accounting: The Universal Language of Business (cont'd.) Inputs Source Documents Inputs Source Documents Processing Tasks Processing Tasks Outputs Financial and Management Accounting Reports Outputs Financial and Management Accounting Reports  Financial condition  Results of operations  Investments by and distributions to owners  Financial condition  Results of operations  Investments by and distributions to owners  Analyzing  Classifying  Recording  Analyzing  Classifying  Recording  Checks  Invoices  Sales Slips  Receipts  Checks  Invoices  Sales Slips  Receipts

5. Using Accounting Reports for Making Business Decisions There are two groups that use accounting reports: Using Accounting Reports for Making Business Decisions There are two groups that use accounting reports: Section 2 Accounting: The Universal Language of Business (cont'd.)  individuals outside the business who have an interest in the business  individuals inside the business  individuals outside the business who have an interest in the business  individuals inside the business

6. Financial Accounting Financial accounting focuses on reporting information to external users. Financial Accounting Financial accounting focuses on reporting information to external users. Section 2 Accounting: The Universal Language of Business (cont'd.) Who Uses Financial Accounting Reports?  potential investors  individuals and institutions, such as banks, that loan money to a business  local, state, and federal governments  workers, consumers, union leaders, and competitors  potential investors  individuals and institutions, such as banks, that loan money to a business  local, state, and federal governments  workers, consumers, union leaders, and competitors

7. Management Accounting Management accounting focuses on reporting information to management. Management Accounting Management accounting focuses on reporting information to management. Section 2 Accounting: The Universal Language of Business (cont'd.)  Managers

8. Accounting Assumptions Section 2 Accounting: The Universal Language of Business (cont'd.)  business entity  accounting period  going concern  business entity  accounting period  going concern

9. Check Your Understanding Consider creating an “accounting system” for your personal finances. Check Your Understanding Consider creating an “accounting system” for your personal finances. 1. How would you organize the system? 2. What inputs would there be? 3. How might you record your activities? 4. How might you report on those activities? 1. How would you organize the system? 2. What inputs would there be? 3. How might you record your activities? 4. How might you report on those activities? Section 2 Accounting: The Universal Language of Business (cont'd.)