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1.1 What is Accounting?

+There are 5 Main activities involved in accounting:

1. Gathering financial information 

2. Preparing and collecting permanent records.

3. Rearranging, summarizing, and classifying financial information 

4. Preparing information reports and summaries 

5. Establishing controls 

+Accounting Helps Businesses Answer Questions

Is the business earning enough profit?

Are the selling prices of the products high enough?

What is the value of all the goods for sale?

Every business requires good financial information to make good decisions.

By enabling financial information to be gathered and prepared, a good accounting system provides the answers to many questions

To whom was cheque No. 333 issued?

How much did John Doe earn last year?

Are our customers paying their bills on time?

+Accounting can also help Answer Questions

Other persons, companies or organizations might seek answers to the following questions:

Should I lend money to this business?

Should I buy into this business?

Should I sell this business?

Is the business well run?

Is the company growing satisfactorily?

Can the business afford to pay more to its employees?

Is the business paying the proper amount of income tax?

+Accounting Term: Accounting Records

Accounting Records are orderly records of the financial activities of a business.

Bookkeepers and Accountants both work with Accounting records.

+Compare

involves the planning and keeping of accounting records. There may be some analyzing and interpreting involved but not to the extent of accounting.

Bookkeeping is the recording, posting , and proving of the financial data. Bookkeeping takes place before accounting takes place.

is the planning, keeping, analyzing and interpreting of accounting records.

Accounting is the establishing and maintaining of the entire accounting system, the interpreting of the results of the recorded data, and the assisting in the management or decision-making aspects of the organization.

Bookkeeping Accounting

+The Accounting Clerk (Bookkeeper) The work of an accounting clerk is clerical in nature and mostly concerned with routine matters.

ensures that transactions are properly recorded with supporting documents

records the accounting entries in the books of account and balances the ledger

makes payroll calculations, payroll cheques and other payroll records

carries out all necessary banking transactions

+The AccountantThe work of an accountant is broader is scope and requires more education and experience.

develops a system to ensure that correct data are entered into the accounting system

ensures that generally accepted accounting standards are met

interprets data produced by the accounting system

prepares reports based on data

participates in management meetings

supervises the work of all accounting employees

+Bookkeeper or Accountant Who does the following types of work?

Ensuring that transactions are properly recorded and supporting documents are present and correct.

Carrying out necessary banking transactions.

Developing a system to ensure correct data are entered into an accounting system.

Recording the accounting entries and balancing the ledger

Interpreting data produced by the accounting system.

Participating in management meetings are assisting in making business decisions.

Bookkeeper

Bookkeeper

Accountant

Bookkeeper

Accountant

Accountant

+ Accounting is the Language of

Business

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Why Study Accounting?

+Personal Benefits

Budgeting

Investments

Keeping track of financial records – ex. Bank Account

Income Taxes

Payroll deductions

Mortgages and Loans

How can an understanding of accounting be beneficial to a persons daily life

+Career Benefits

Daily Banking

Amounts owed by customers

Producing Income Statements

Preparing Payroll

How could an understanding of Accounting be beneficial in many different careers?

+Business Careers

VERY!

Business and Entrepreneurialism is growing

Every business must account for its financial activities

Financial activities determine whether the business grows or even whether the business even continues.

Accounting information is critical. 

Inaccurate accounting records could easily contribute to business failures and a lot of unnecessary stress!

How important is an understanding of Accounting to any Business?

+Accounting as a Profession

Canada has 3 national professional accounting organizations

Chartered Accountant (CA)

Certified General Accountant (CGA)

Certified Management Accountant (CMA).

Each profession requires you to complete a prescribed course usually after you have completed a university degree.

Note: As of January 2013, CA’s and CMA’s have integrated into one professional group – Chartered Professional Accountants Canada. CGA’s are joining this group this year.

+Working Accountants

1. Public accountant  serves the general public for a fee, much like a

doctor or lawyer does. The main type of work done by public accountants

is auditing. Auditing is the examination and testing of the

books, records, and procedures of a business in order to be able to express an opinion about its financial statements.

Two working categories:

+Working Accountants

2. Professional accountant  may choose industrial or institutional accounting Industrial accountants work for large companies

such as Ford or Microsoft. Institutional accountants work for the government,

banks, large insurance companies and similar organizations.

Two working categories:

+Assignment.

See Blackboard for Details.