Accounting – the language of Business. Glencoe Accounting And Mrs. Nichols. Key Terms. Accounting Systems Manual Accounting Systems Computerized Accounting Systems Accounting Standards GAAP “gap” IAS Financial Reports Financial Accounting Management Accounting Accounting Assumptions
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Accounting – the language of Business Glencoe Accounting And Mrs. Nichols
Key Terms • Accounting Systems • Manual Accounting Systems • Computerized Accounting Systems • Accounting Standards • GAAP “gap” • IAS • Financial Reports • Financial Accounting • Management Accounting • Accounting Assumptions • Business Entity • Accounting Period • Going Concern
Objective You will have an understanding of the computerized accounting system and how the information processed is used to make business decisions. Decisions like a popular band deciding where to play, the cost of their tour, how profitable their music has been or how much the ticket prices should be? These decisions are probably made by a financial team!
Accounting Systems Collect Document Report
Input Checks Invoices Sales slips Receipts Source Documents – Transactions1st step to Financial Reporting
Processing Analyzing Classifying Recording Tasks
Outputs Financial condition Results of operations Investments by and distributions to owners Financial and Management Accounting Reports
System – Financial Accounting Outsiders looking in (external reportin) Investors Loaning Institutions or Individuals Local, State and Federal Government Employees, Unions, Consumers
System – Management Accounting • INTERNAL REPORTING • The day-to-day decision makers. • Purchasing • Hiring • Production • Payments • Sales • Collections
Uses of Accounting ReportsList three ways each type is used. Financial Accounting Reports Management Accounting Reports 1 2 3 1 2 3
Accounting Assumptions • Something taken for granted as true • What are some assumptions you make daily? • When you go to a movie? • Go to a restaurant? • Enter school? • Wake up in the morning? • Each business needs to set up systems • (methods to track transactions)
Accounting Assumptions #1 Personal Business • Business Entity • Separate legal entity from the owners personal finances. • Accounting reports, and records are maintained separately. • The most difficult to separate is farming and ranching, why?
Accounting Assumption #2 • Accounting Period • Life of a business is divided into sections of time. • One Month • Quarterly (every 3 months) • One Year Reports are printed for each period and compared to make decisions.
Accounting Assumption #3 • Going Concern • Assume the business will continue to operate unless it is clear it cannot survive. • Many fail in first 5 years
Suppose you work for a company called Greenwood Sky Divers as a sky-diving instructor. Since you have your pilot’s license, you also give flying lessons on the side. You and the owner of Greenwood Sky Divers both belong to a local club, the Greenwood Eagles, whose members get together for sky dives on the weekends. G.S.D is a sole proprietorship that has been in business for six years. The owner of the company regularly reviews the financial reports, prepared by the accountant and compares them from year to year. Accounting Assumptions #1 Business Entity #2 Accounting Period #3 Going Concern