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Chapter 1

Chapter 1. An Introduction to the Role of Accounting in the Business World. Class Suggestions. Read the chapter before class Spend time on the homework Ask questions during class Do a little bit each day Accounting can be fun!. Chapter 1: Objectives.

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Chapter 1

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  1. Chapter 1 An Introduction to the Role of Accounting in the Business World

  2. Class Suggestions • Read the chapter before class • Spend time on the homework • Ask questions during class • Do a little bit each day • Accounting can be fun! Chapter 1

  3. Chapter 1: Objectives • What are the major types of Business Entities,their legal forms and key internal functions? • How do accountants communicate financial information to decision-makers? • What system collects internal financial data? • What and who make up the accounting profession? • What does the future hold for accounting? Chapter 1

  4. Business Entities • Service • Manufacturing • Merchandising • Wholesalers • Retailers Chapter 1

  5. Legal Forms of Businesses • Sole proprietorship Partnership Corporation Chapter 1

  6. External users Rigid rules Historical perspective Aggregate information Quantitative information Internal users Flexible format Future perspective Detailed information Quantitative and qualitative information Financial or Managerial? Chapter 1

  7. Hierarchy of Accounting Chapter 1

  8. Financial Statements • Balance sheet • Income statement • Statement of cash flows • Statement of owners’ equity Chapter 1

  9. Balance Sheet Assets= Liabilities + Owners’ Equity At a Point in Time Consolidates Activity Chapter 1

  10. Income Statement • Revenues minus expenses • For a period of time • Measures gains and losses Chapter 1

  11. Statement of Cash Flows • Details all cash inflows and outflows • For a period of time • Like a checkbook Chapter 1

  12. Statement of Owners’ Equity • Changes in the owners’ equity • For a period of time • Owners’ claim on the assets Chapter 1

  13. Other Annual Report Components • Footnotes • Management discussion & analysis • Independent auditors’ report Chapter 1

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