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ACCT 301 Lecture Notes - Profit Motive

Course Code
ACCT 301

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How they are defined and classified, their differences and why we need them.
Basically an organization is a group of individuals operating together in a systematic
way to achieve a set of objectives. Therefore, the three characteristics of an
organization are:
1. People
2. Purpose
3. Structure
Organizations may also be defined as a machine. It receives inputs from its
environment in the form of resources and converts them into outputs, which satisfy
Inputs -> Organization Processes -> Outputs
why are organizations needed?
Organizations enable objectives to be achieved that could not be achieved by the
efforts of individuals on their own, therefore they exist to:
1. Overcome people’s individual limitations
2. Enable people to specialize
3. Save time
4. Enable people to pool their expertise
5. They are power centers organization may be able to influence events on a
large scale by influencing demand, winning orders and creating wealth.
6. Enable synergy: i.e. 1+1=3! By bringing together two individuals their
combined output will exceed their output if they continued working separately?
How do organizations differ?
The differences between organizations are so large that it may be quite impossible
to list them all; yet, one may classify their differences into the following categories:
1. Structure: Formal or Informal?
2. Classification by size: e.g. number of employees, volume of output
3. Classification by profit motive: Profit or non-profit oriented
4. Classification by legal form: sole traders, partnerships or limited companies
5. Ownership: Public vs. private?
Formal and informal organizations
the difference between formal and informal organizations is in the way they are
structured. An organization structure is the grouping of people into departments or
section and the allocation of responsibility and authority. As such the structure
affects the communication process within the organization.
Within a formal organization, a hierarchical structure exists, reflecting
communication flowing downwards from top management to the departments further
down the organization.
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