Title: college accounting
1Chapter
1
Skyline College
2The Need for Financial Information
In running a business, you need answers to
questions.
- How much cash does the business have?
- How much money do customers owe?
- What is the cost of the merchandise sold?
- What is the change in sales volume?
- How much money is owed suppliers?
- What is the profit or loss?
3Accounting Defined
Objective 1
to owners, managers, and other interested parties.
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5Accounting Careers
Many jobs are available in the accounting
profession. Some examples are
Accounting Clerk
Bookkeeper
Accountant
6Accounting Clerk
- Usually requires one to two accounting courses
- Generally requires little or no experience
- Requires computer skills
- Computerized accounting
- Word
- Excel
7Bookkeeper
- Usually requires one to two years of accounting
education - Generally requires experience as an accounting
clerk
8Accountant
- Usually requires a bachelors degree
- Most entry-level positions do not require
experience. - Accountants work in one of these areas
- Public accounting
- Managerial accounting
- Governmental accounting
9Public Accounting
A certified public accountant, or CPA, is an
independent accountant who provides accounting
services to the public for a fee. They provide
services such as
- Management advisory services
10Managerial Accounting
accounting work carried on by an accountant
employed by a single business in industry. They
involve working on
- Establish accounting policies
- Manage the accounting system
- Prepare and interpret financial statements
- Prepare tax forms and do tax planning
- Prepare internal reports for management
11Governmental Accounting
involves keeping financial records and preparing
financial reports as part of the staff of
federal, state, or local governmental units, such
as
- Securities and Exchange Commission (SEC)
- Internal Revenue Service (IRS)
- Federal Bureau of Investigation (FBI)
- Homeland Security
12Users of Financial Information
Inside The Business
Outside The Business
Financial Reports
Employees
13Customers
Use financial information to
- Determine the economic health of the business
- Determine the likelihood that the firm will
remain in business to provide parts, service, and
support
14Employees and Unions
Use financial information to
- Negotiate wages and benefits
- Monitor profit-sharing plans
15Sarbanes-Oxley Act
- Major change in the regulatory environment.
- Is designed to crackdown on corporate fraud and
corruption.
16Three major legal forms of business entity
Partnership
17 18Partnership
19Typical partnerships
Professional services such as
20Partners must agree upon
- Amount each partner will contribute
- Percentage of ownership of each partner
- Share of profits of each partner
- Duties each partner will perform
- Debts - the responsibility each partner has for
the partnerships debts
21 22 Sole Proprietorship
Partnership
Corporation
Ownership
1 owner
2 or more
Can be thousands
Continues indefinitely
- Ends when owner
- is unable to
- carry on,
- dies, or
- closes the firm
Life
- Ends when partner(s)
- dies,
- close the firm
- withdraws
Responsibility for business debts if firm is
unable to pay
Stockholders can lose only the amount invested
Owner
Partners individually and jointly
23Corporate Ownership
Stock is issued in the form of stock certificates
and represents ownership of the corporation.
Corporate ownership is determined by the number
of shares held compared to the number of shares
issued by the corporation.
Corporations can have new owners daily if their
shares are actively traded on stock exchanges.
24Stockholders
Stockholders (owners of a corporation) have
voting rights for certain corporate decisions,
one per share. Stockholders can lose only up to
the amount of their investment (cost of stock) if
the business is unable to pay its debts.
25All three forms of business operate under the. .
. Separate Entity Assumption.
The separate entity assumption is the concept of
keeping a firms financial records separate from
the owners personal financial records.
26Generally Accepted Accounting Principles
(GAAP) are accounting standards developed and
applied by professional accountants.
Publicly owned companies must follow GAAP.
27Development of GAAP
SEC
Governmental Agency
Has final say
Delegates to
FASB
Accounting Profession
Develops GAAP
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