chapter 2 accounting exam review the world of business and accounting
Post on 25-Feb-2016
89 Views
Preview:
DESCRIPTION
TRANSCRIPT
Chapter 2 AccountingExam Review
The World of Business and Accounting
Mr. SherpinskyCouncil Rock High School
Business, Computers, & Information Technology
Vocabulary to Know!Key Terms
free enterprise system profit loss entrepreneur capital service business merchandising business manufacturing business
Key Terms sole proprietorship partnership corporation charter
The Environment of BusinessThe Environment of Business
In the U.S. we have a free enterprise system; people are free to produce goods and services and spend money as they wish.A business can operate at a profit or a loss. If the revenues are greater than the costs, the money left over is profit. When costs are greater than revenues, the business operates at a loss.
In order to survive, a business must do two things… operate at a profit, and have an individual willing to take the risk to run
it.
Traits of Entrepreneurs
Roles ina Business
Inventors
Investors
EmployeesManagers
Entrepreneurs
entrepreneurA person who
transforms ideas for products or services
into real-world businesses.
The Need for a Risk-TakerAn entrepreneur transforms ideas for products or
services into actual (real-world) businesses.
Types and Forms of BusinessTypes of Business OperationsThere are three types of business operations:
Service businesses provide services for fees. Merchandising businesses buy and sell finished
products. Manufacturing businesses buy materials and make
finished products.
service business
A business that provides a
needed service for a fee.
merchandising business
A business that buys finished products and
resells them to individuals or other
businesses.
manufacturing businessA 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.
Types and Forms of BusinessTypes and Forms of BusinessIn a free enterprise system, an entrepreneur can
choose the type and form of business to run.
Each type needs capital (money) from investors, banks, or business owners to
begin.
Forms of Business Organization
Sole ProprietorshipSole means “single” and proprietor means “owner.” – Most common in US! A sole proprietor is a single owner, but the operation
may have many managers and employees. There are advantages and disadvantages to being a
sole proprietor.
Forms of Business OrganizationPartnership
When two people or more people enter into an agreement to operate a business as co-owners, a partnership is formed.
There are advantages and disadvantages to a partnership.
Forms of Business OrganizationCorporation
A corporation often starts off as a sole proprietorship or partnership. In order to become a corporation an organization must obtain a charter (legal permission to operate).
There are advantages and disadvantages to a corporation.
Review What You’ve Learned
Key Terms Review free enterprise system
A system in which individuals are free to produce the goods and services they choose.
profitThe amount earned above the amount of expense incurred to keep the business operating.
lossThe result when a business spends more money than it earns.
entrepreneurA person who transforms ideas for products or services into real-world business.
Review What You’ve Learned
Key Terms Review capital
Money supplied by investors, banks, or owners of a business.
service businessA business that provides a needed service for a fee.
merchandising businessA business that buys finished goods and resells them to individuals or other businesses.
manufacturing businessA business that buys raw materials and transforms them into financial products by using labor and machinery.
Review What You’ve Learned
Key Terms Review sole proprietorship
A business owned by one person. partnership
A business owned by two or more persons, called partners, who agree to operate the business as co-owners.
corporationA business organization recognized by law to have a life of its own.
charterThe legal permission, granted by a state, that gives a corporation certain rights and privileges and spells out the rules under which the corporation is to operate.
Questions for Review
Main IdeaAccounting: Universal Language of
BusinessThe accounting system produces
information used to make decisions.
Vocabulary to Know!Key Terms
accounting system manual accounting system computerized accounting system GAAP financial reports financial accounting management accounting business entity accounting period going concern
The Accounting Systems
Two types of accounting systems
Manual AccountingSystem
Computerized Accounting System
accounting systemDesigned to collect, document, and report on financial transactions affecting
the business.
manual accounting systemWhen accounting information is
processed by hand.
computerized accounting systemWhen accounting information is processed by recording it into a
computer.
Language of Business
Accountants must follow GAAP rules issued by the Financial Accounting Standards Board (FASB).
GAAP (generally accepted accounting principles)The set of rules that all accountants use to prepare
financial reports.
What is GAAP?
Language of BusinessWhat Are
financial reports?
financial reportsDocuments that present summarized information
about the financial status of a business.
Financial reports contain a summary of the financial status of a business.
Most common time-period for reports is annual.. (Yearly)
Language of BusinessUsing Accounting Reports for Making
Business DecisionsAccounting provides financial information about a business or
organization.
Two groups that useaccounting reports
Individuals outside the business who have an interest in the business
Individuals inside the business
investors, the local, state, and federal
government, and employees, consumers, and
competitors.
managers, owners
Making Business DecisionsThose interested in the financial accounting reports of a business include:
InvestorsLocal, state, and
federal government
Employees, consumers, and
competitors
financial accountingThe type of accounting that focuses on reporting information to external users.
Making Business Decisions
Management accounting reports are prepared for managers involved in:
management accountingThe type of accounting that focuses on reporting information to management; often referred to as
accounting for internal users of accounting information.
Purchasing decisionsHiring decisionsProduction decisionsPaymentsSalesCollections
Accounting Assumptions
Three GAAP Assumptions
Business entity
Accounting period
Going concern
business entityThe 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.
Review What You’ve Learned
Key Terms Review accounting system
A system designed to collect, document, and report on business transactions.
manual accounting systemA type of accounting system in which information is processed by hand.
computerized accounting systemA type of accounting system in which information is recorded by entering it into a computer.
Review What You’ve Learned
Key Terms Review GAAP
The set of rules that all accountants use to prepare financial reports.
financial reportsDocuments that present summarized information about the financial status of a business.
financial accountingThe type of accounting that focuses on reporting information to external users.
management accountingThe type of accounting that focuses on reporting information to management; often referred to as accounting for internal users of accounting information.
Review What You’ve Learned
Key Terms Review 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.
accounting periodThe period of time covered by an accounting report.
going concernThe accounting assumption that a business is expected to operate indefinitely.
Questions?• EXAM- Next Class
top related