Chapter 1
What is accounting?
The Language of Business!
THE ACCOUNTING PROFESSION
•
Public Accountants
Service to the general public through the services they
perform.
•
Private Accountants
Individuals in companies involved in activities including cost
and tax accounting, systems, and internal auditing.
•
Not For Profit Accountants
Reporting and control for government units, foundations,
hospitals, labor unions, colleges/universities, and charities.
What about other professions than
accounting?

What are some other professions that use accounting information?

Work together to create a list, be ready to back up the professions you list.
The Building Blocks of Accounting
Ethics In Financial Reporting
Standards of conduct by which one’s actions are judged as right or
wrong, honest or dishonest, fair or not fair, are Ethics.
Recent financial scandals include: Enron, WorldCom,
HealthSouth, AIG, and others.
Congress passed Sarbanes-Oxley Act of 2002.
Effective financial reporting depends on sound ethical behavior.
Ethics
Review Question
Ethics are the standards of conduct by which one's actions are
judged as:
a. right or wrong.
b. honest or dishonest.
c. fair or not fair.
d. all of these options.
What is the difference between a service
business and a manufacturing business?
Service business: performs an activity for a fee
Manufacturing business: produces a product for a fee
Service or Manufacturing?

The Gap

Glendale Medical Center

Handy Man

Ford Motor Company

The Chase Manhattan Bank

Michigan City Animal Hospital

Prudential Insurance Company of America

Bethlehem Steel Corporation
Forms of Business Ownership
Proprietorship
Partnership
Generally owned
by one person.
Owned by two or
more persons.
Often small
service-type
businesses
Often retail and
service-type
businesses
Owner receives
any profits,
suffers any
losses, and is
personally liable
for all debts.
Generally
unlimited
personal liability
Partnership
agreement
Corporation
Ownership
divided into
shares of stock
Separate legal
entity organized
under state
corporation law
Limited liability
What is your favorite part of
unloading the dishwasher?
The Basic Accounting Equation
Assets
=
Liabilities
Assets
Anything of value
Resources a business owns.
Provide future services or benefits.
Cash, Supplies, Equipment, etc.
+
Owners’ Equity
The Basic Accounting Equation
Assets
=
Liabilities
+
Liabilities
Amount owed by a business
Claims against assets (debts and obligations).
Creditors - party to whom money is owed.
Accounts payable, Notes payable, etc.
Owners’ Equity
The Basic Accounting Equation
Assets
=
Liabilities
+
Owners’ Equity
Owners’ Equity
The amount remaining after the value of all liabilities is subtracted
from the value of assets
Ownership claim on total assets.
Referred to as residual equity.
Capital, Drawings, etc. (Proprietorship or Partnership).
Assets
=
Liabilities
+
Owners’ Equity
MUST ALWAYS
BALANCE!!!!
Create a list of accounts for
yourself
Assets


Car

House

Clothing

Shoes

DVD Collection

Furniture
Liabilities

Student Loans

Mortgage

Car loan
Owners Equity

Assets – Liabilities…..