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Chapter 1

Chapter 1. An Introduction to the Role of Accounting in the Business World. Slide 1.1. Chapter 1 Learning Objectives. Identify the major types of business entities, their principal legal forms, and their key internal functions.

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Chapter 1

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  1. Chapter 1 An Introduction to the Role of Accounting in the Business World Slide 1.1

  2. 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. Slide 1.2

  3. 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 Slide 1.3

  4. Major Types of Businesses • Service: Charles Schwab & Co. (stock brokerage firm) • Manufacturing: General Motors • Merchandising: Wal-Mart Slide 1.5

  5. Common Forms of Business Organizations • Sole Proprietorship • Partnership • Corporation Slide 1.6

  6. Internal Functions of Business Organizations • Management . . . production management, personnel management . . . • Marketing . . . advertising, consumer research . . . • Finance . . . raising “capital,” investing capital . . . • Accounting • Slide 1.7

  7. 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. Slide 1.8

  8. Communicating Financial Information to External Decision Makers • Balance Sheet • Income Statement • Statement of Stockholders’ Equity • Statement of Cash Flows • Slide 1.9

  9. Communicating Financial Information to Internal Decision Makers Customized financial reports . . . designed with these decision makers’ information needs in mind. Slide 1.10

  10. Accounting . . . A Little History • Middle Ages: Pacioli and double-entry bookkeeping • Industrial Revolution: Accounting Systems Evolve • Accounting in the Computer Age • Slide 1.11

  11. GAAP The Rules of the Game The concepts, guidelines, and rules that accountants follow in recording and reporting financial information. Slide 1.12

  12. The Accounting Profession • Accountant vs. CPA • Private vs. Public Accounting • Work roles in private accounting . . . controller, cost analyst, tax accountant • Slide 1.13

  13. 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 . . . • Slide 1.14

  14. Regulation of the Accounting Profession • Securities and Exchange Commission • Financial Accounting Standards Board • State Boards of Public Accountancy Slide 1.15

  15. Accounting . . . A Profession in Transition • Computers everywhere! • Trend toward multinational business operations • 150-hour educational requirement Slide 1.16

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