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CHAPTER 1

INTRODUCTION TO ACCOUNTING

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LEARNING OBJECTIVE 1

DESCRIBE THE PURPOSE OF ACCOUNTING.

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THE PURPOSE OF ACCOUNTING

FINANCIAL INFORMATION ABOUT THE CURRENT OPERATIONS AND FINANCIAL CONDITION OF A BUSINESS TO INDIVIDUALS AND ORGANIZATIONS

Keep track of and present financial info $$$$$$$$

TO PROVIDE:

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WHO ARE THE USERS OF ACCOUNTING INFORMATION? Anyone who cares about keeping

track of $

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LEARNING OBJECTIVE 2

DESCRIBE THE ACCOUNTING PROCESS.

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THE ACCOUNTING PROCESS

GATHERING FINANCIAL INFORMATION ABOUT A BUSINESS AND REPORTING THIS INFORMATION TO USERS

ACCOUNTING IS A SYSTEM OF:

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STEP ONE

ANALYZING

LOOKING AT EVENTS THAT HAVE TAKEN PLACE AND

THINKING ABOUT HOW THEY AFFECT THE BUSINESS

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STEP TWO

ENTERING FINANCIAL INFORMATION ABOUT

EVENTS INTO THE ACCOUNTING SYSTEM

RECORDING

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STEP THREE

SORTING AND GROUPING SIMILAR ITEMS TOGETHER

RATHER THAN MERELY KEEPING A SIMPLE, DIARY-

LIKE RECORD OF NUMEROUS EVENTS

CLASSIFYING

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STEP FOUR

THE AGGREGATION OF MANY SIMILAR EVENTS TO

PROVIDE INFORMATION THAT IS EASY TO UNDERSTAND

SUMMARIZING

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STEP FIVE

TELLING THE RESULTS

REPORTING

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STEP SIX

DECIDING THE MEANING AND IMPORTANCE OF THE INFORMATION IN VARIOUS

REPORTS

INTERPRETING

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THE ACCOUNTING PROCESS: SIX MAJOR STEPS

ANALYZING RECORDING

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THE ACCOUNTING PROCESS: SIX MAJOR STEPS

SUMMARIZINGCLASSIFYING

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REPORTING INTERPRETING

THE ACCOUNTING PROCESS: SIX MAJOR STEPS

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LEARNING OBJECTIVE 3

DEFINE GAAP AND DESCRIBE THE PROCESS USED BY FASB TO DEVELOP THESE PRINCIPLES.

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GAAPGENERALLY ACCEPTED

ACCOUNTING PRINCIPLESDEVELOPED BY THE FINANCIAL

ACCOUNTING STANDARDS BOARD (FASB)

PROCEDURES AND GUIDELINES TO BE FOLLOWED IN THE ACCOUNTING AND REPORTING PROCESS

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LEARNING OBJECTIVE 4

DEFINE THREE TYPES OF BUSINESS OWNERSHIP STRUCTURES.

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THREE TYPES OF OWNERSHIP STRUCTURESSOLE PROPRIETORSHIPPARTNERSHIP CORPORATION

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SOLE PROPRIETORSHIPONE OWNEROWNER ASSUMES ALL RISKOWNER MAKES ALL DECISIONS

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PARTNERSHIPTWO OR MORE PARTNERSPARTNERS SHARE RISKSPARTNERS MAY DISAGREE ON

HOW TO RUN THE BUSINESS

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CORPORATIONSTOCKHOLDERSSTOCKHOLDERS HAVE LIMITED

RISKSTOCKHOLDERS MAY HAVE LITTLE

INFLUENCE ON BUSINESS DECISIONS

http://www.citmedialaw.org/legal-guide/forming-corporation-california

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LEARNING OBJECTIVE 5

CLASSIFY DIFFERENT TYPES OF BUSINESSES BY ACTIVITIES.

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TYPES OF BUSINESSESSERVICE BUSINESSMERCHANDISING BUSINESSMANUFACTURING BUSINESS

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SERVICE BUSINESS

A BUSINESS THAT PROVIDES A SERVICE

TRAVEL AGENCY

COMPUTERCONSULTANT

PHYSICIAN

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MERCHANDISING BUSINESSA BUSINESS THAT BUYS A PRODUCT FROM

ANOTHER BUSINESS TO SELL TO CUSTOMERS

DEPARTMENTSTORE

PHARMACYJEWELRYSTORE

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MANUFACTURING BUSINESS

A BUSINESS THAT MAKES A PRODUCT TO SELL

AUTOMOBILEMANUFACTURER

FURNITUREMAKER TOY

FACTORY