Presented by: Mr. Raziq

Chapter 1

An Introduction to the Role of Accounting in the Business World

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Presented by: Mr. Raziq

Chapter 1 Learning Objectives

• Identify the major types of business entities, their principal legal forms, and their key internal functions.

• Identify the primary means used by accountants to communicate financial information to decision makers.

• Briefly describe how financial data are collected by an organization’s accounting system.

• Define the nature, structure, and major segments of the accounting profession and important changes presently underway within the profession.

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Keys to Success in the Business World

• Hard Work

• A Little Luck . . . Maybe a lot of luck

• Most important . . . An ability to make wise economic decisions

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Major Types of Businesses

• Service: Charles Schwab & Co. (stock brokerage firm)

• Manufacturing: General Motors

• Merchandising: Wal-Mart

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Common Forms of Business Organizations

• Sole Proprietorship

• Partnership

• Corporation

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Internal Functions of Business Organizations

• Management . . . production management, personnel management . . .

• Marketing . . . advertising, consumer research . . .

• Finance . . . raising “capital,” investing capital . . .

• Accounting

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Presented by: Mr. Raziq

The Nature of Accounting . . . A Means to an End

Accounting is a service activity. Its function is to provide quantitative information, primarily financial in nature, about economic entities that is intended to be useful in making economic decisions--in making reasoned choices among alternative courses of action.

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Communicating Financial Information to External Decision Makers

• Balance Sheet

• Income Statement

• Statement of Stockholders’ Equity

• Statement of Cash Flows

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Communicating Financial Information to Internal Decision Makers

Customized financial reports . . . designed with these decision makers’ information needs in mind.

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Accounting . . . A Little History

• Middle Ages: Pacioli and double-entry bookkeeping

• Industrial Revolution: Accounting Systems Evolve

• Accounting in the Computer Age

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Presented by: Mr. Raziq

GAAPThe Rules of the Game

The concepts, guidelines, and rules that accountants follow in recording and

reporting financial information.

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The Accounting Profession

• Accountant vs. CPA

• Private vs. Public Accounting

• Work roles in private accounting . . . controller, cost analyst, tax accountant

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Public Accounting . . . A Closer Look

• Major services: independent auditing, taxation services, management consulting, bookkeeping

• Independent auditors: society’s financial detectives

• The “Big Six” accounting firms . . . Arthur Andersen, Coopers & Lybrand, Deloitte & Touche . . .

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Regulation of the Accounting Profession

• Securities and Exchange Commission

• Financial Accounting Standards Board

• State Boards of Public Accountancy

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Accounting . . . A Profession in Transition

• Computers everywhere!

• Trend toward multinational business operations

• 150-hour educational requirement

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