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Lecture 1

ADM1340 Lecture 1: Chapter 1 note

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Lamia Chourou

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Chapter 1 1. Accounting is the information system that ▪ Identifies and records the economic events of an organization ▪ And communicates them to a wide variety of interested users It is “the language of business” It helps users to make decisions 2.Internal users Users within the organization Accounting information helps to make decisions • whether to purchase a new equipment/ whether to hire new employees/determine the price to sell products 3. External users Users who are outside the organization Accounting information helps to make decisions • Is the company earning enough to give me my required return on investment? /Will the company be able to repay its debts as the debts come due? 4.Forms of Business Organization 1) Proprietorship: a business owned by one person Advantages: simple to establish / owner controlled Disadvantages: unlimited liability / financing may be difficult / limited life 2) Partnership: a business owned by two or more people Advantages: simple to establish 更多 broader skills and resources / shared financial resources and control Disadvantages: partners personally liabl合作伙伴承担个人责任 / transfer of ownership may be difficult / limited life 3) Corporation: a separate legal entity owned by shareholders. • Public: list and trade their share on public stock exchanges (ex. Bombardier, Research in motion) • Private: do not list or trade their shares on public stock exchange (ex. McCain Foods) Advantages: easy to sell or transfer ownership / greater capital raising potential / legal liability / indefinite 无限生命力 Disadvantages: more expensive and complex to set up / must file corporate income tax returns annually每年必须提交企业所得税申报表 Rules and practices for the preparation of financial statements • Publicly- traded corporation use International Financial Reporting Standards (IFRS) • Private corporations may use IFRS or Accounting Standards for Private Enterprises (ASPE) • Proprietorships and partnerships generally follow ASPE for external reporting 5.Type of Business Activity 1) Financing activities Obtaining (and repaying) funds to finance the operations of the business Two primary sources: • Debt: borrowing money from leaders and other creditors which creates a liability • Equity: issuing (selling) ownership interests in the corporation to shareholders 2) Investing activities Obtaining resources or assets needed to operate the busin
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