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Accounting = Language of Business Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Identify career opportunities in the accounting field. Describe the types of businesses and organizations that hire accountants. Compare for-profit businesses and not-for-profit organizations. Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Section 1.2 Accounting Careers: The Possibilities are Endless! Key Terms accountant accounting clerk for-profit business not-for-profit organization public accounting firm audit certified public accountant (CPA) Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. The Changing Horizon 1.2 Section 1.2 Accounting Careers: The Possibilities are Endless! As an accountant, you could work for Glencoe Accounting Big-name businesses like Nike or Hard Rock Cafe Movie producers Well-known celebrities like Will Smith or Natalie Portman Publishers of magazines such as PC World or Sports Illustrated Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Types of Organizations Section 1.2 Accounting Careers: The Possibilities are Endless! There are many career opportunities for accountants in For-profit businesses Not-for-profit organizations for-profit business A business that operates to earn money for its owners. not-for-profit organization An organization that operates for purposes other than making a profit. Public accounting firms Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Types of Organizations Section 1.2 Accounting Careers: The Possibilities are Endless! What Is an Accounting Clerk? accounting clerk An entry-level job that can vary from specializing in one part of the system to doing a wide range of tasks. Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Types of Organizations Section 1.2 Accounting Careers: The Possibilities are Endless! Not-for-profit organizations $ Donations $ Tax Dollars Revenues Glencoe Accounting Expenses Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Types of Organizations Section 1.2 Accounting Careers: The Possibilities are Endless! Public Accounting Firms Certified public accountants perform: Some well-known public accounting firms are: audits financial planning tax document preparation Ernst & Young Deloitte & Touche KPMG PricewaterhouseCoopers audit The review of a company’s accounting systems and financial statements to confirm that they follow generally accepted accounting principles. Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Question 1 Fill in the blank to identify: F = businesses you think are for-profit businesses N = businesses you think are not-for-profit organizations P = businesses you think are public accounting firms F 1. General Motors 6. Deloitte & Touche P 2. MTV F 7. National Cathedral N 3. American Lung Association N 8. Boeing F 4. PricewaterhouseCoopers P 9. Ernst & Young P 5. Walt Disney World F 10. KPMG P What about our list? Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Disclosure Time Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. End of The accounting system produces information used by businesses to make decisions. Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Describe profit, risk-taking, and entrepreneurs. Describe service, merchandising, and manufacturing businesses. Compare the sole proprietorship, partnership, and corporate forms of businesses. List the advantages and disadvantages of each form of business organization. Describe the purpose of accounting. Explain financial and management accounting. Describe the three basic accounting assumptions. Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Section 2.1 Exploring the World of Business Key Terms Glencoe Accounting free enterprise system merchandising business profit manufacturing business loss sole proprietorship entrepreneur partnership capital corporation service business charter Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. The Environment of Business Section 2.1 Exploring the World of Business Free Enterprise System Profit Loss free enterprise system A system in which individuals are free to produce the goods and services they choose. profit The amount of money earned over and above the amount spent to keep the business operating. loss When a business spends more money than it earns. Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. The Environment of Business Section 2.1 Exploring the World of Business Operate at a profit What a business needs to survive An individual willing to take the risk Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. The Environment of Business Section 2.1 Exploring the World of Business Inventors Entrepreneurs Roles in a Business Managers Glencoe Accounting Investors entrepreneur A person who transforms ideas for products or services into real-world businesses. Employees Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. The Environment of Business Section 2.1 Exploring the World of Business Self-Starters Organizational Skills Traits of Entrepreneurs Accounting Skills Glencoe Accounting Marketing Knowledge Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Types and Forms of Businesses Section 2.1 Exploring the World of Business Three Types of Business Operations Service Business service business A business that provides a needed service for a fee. Merchandising Business merchandising business A business that buys finished products and resells them to individuals or other businesses. Manufacturing Business manufacturing business A business that buys raw materials, uses labor and machinery to transform them into finished products, and sells the finished products to individuals or other businesses. What about our list? Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Types and Forms of Businesses Section 2.1 Exploring the World of Business $ All types of businesses need capital to begin. capital Money that investors, banks, or business owners supply for a business to begin. Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Types and Forms of Businesses Section 2.1 Exploring the World of Business Three Types of Business Organization Sole Proprietorship Partnership Corporation sole proprietorship A business owned by one person. partnership A business owned by two or more persons. corporation A business recognized by law to have a life of its own. Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Types and Forms of Businesses Section 2.1 Glencoe Accounting Exploring the World of Business Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Types and Forms of Businesses Section 2.1 Glencoe Accounting Exploring the World of Business Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Types and Forms of Businesses Section 2.1 Exploring the World of Business A corporation must obtain a charter. charter Legal permission to operate. What about our list? Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Section 2.2 Accounting: The Universal Language of Business Key Terms accounting system management accounting manual accounting system business entity computerized accounting system accounting period going concern GAAP financial reports financial accounting Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. The Accounting System Section 2.2 Accounting: The Universal Language of Business Manual Accounting System Two types of accounting systems Computerized Accounting System accounting system Designed to collect, document, and report on financial transactions affecting the business. manual accounting system When accounting information is processed by hand. Glencoe Accounting computerized accounting system When accounting information is processed by recording it into a computer. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. The Accounting System Section 2.2 Accounting: The Universal Language of Business What Is GAAP? GAAP (generally accepted accounting principles) The set of rules that all accountants use to prepare financial reports. Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. The Accounting System Section 2.2 Accounting: The Universal Language of Business What Are financial reports? financial reports Documents that present summarized information about the financial status of a business. Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Using Accounting Reports for Making Business Decisions Section 2.2 Accounting: The Universal Language of Business Individuals outside the business who have an interest in the business Two groups that use accounting reports Individuals inside the business Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Using Accounting Reports for Making Business Decisions Section 2.2 Accounting: The Universal Language of Business Those interested in the financial accounting reports of a business include: Investors Local, state, and federal government Employees, consumers, and competitors financial accounting The type of accounting that focuses on reporting information to external users. Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Using Accounting Reports for Making Business Decisions Section 2.2 Accounting: The Universal Language of Business Management accounting reports are prepared for managers involved in: Purchasing decisions Hiring decisions Production decisions Payments Sales Collections management accounting The type of accounting that focuses on reporting information to management; often referred to as accounting for internal users of accounting information. Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Accounting Assumptions Section 2.2 Accounting: The Universal Language of Business GAAP Assumptions Business entity Accounting period business entity The accounting assumption that a business exists independently of its owner’s personal holdings. The accounting records and reports are maintained separately and contain financial information related only to the business. Going concern Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Accounting Assumptions Section 2.2 Accounting: The Universal Language of Business GAAP Assumptions Business entity accounting period The period of time covered by an accounting report. Accounting period Going concern Glencoe Accounting going concern The accounting assumption that a business is expected to operate indefinitely. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Question 1 DePalm Pizza had the following cash transactions yesterday. Receipts (money in): Checks: $650.00, Cash $500.00 Expenditures (money out): Gas and oil for delivery vehicle $75.98, supplies $477.50, salaries $380.00, and miscellaneous expenditures $123.76. Did DePalm have a “profit” or “loss” for the day? Step 1 Step 2 Step 3 Glencoe Accounting Calculate the total receipts. $650.00 + $500.00 = $1,150 Calculate the total expenditures. $75.98 + $477.50 + $380.00 + $123.76 = $1,057.24 Calculate the net profit (loss). $1,150.00 - $1,057.24 = $92.76 profit (Receipts exceed expenditures) Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Question 2 Sole proprietorship is the most popular form of business ownership, yet very few large businesses are sole proprietorships. Give at least two reasons to explain this. 1. Sole proprietorships have the expertise of only the owner to call on. For example, the owner may be a great accountant but only a fair salesperson. 2. The business has the promise of only one owner to use to try to secure money from investors or lenders. 3. The owner bears all of the risk of loss, or unlimited liability. The owner could lose personal equity if the business fails. 4. The most talented potential employees would tend to prefer the job security of working in larger firms. Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.