BUSI 1101 Study Guide - Midterm Guide: Legal Personality, Regional Policy Of The European Union, Accounting
29 Apr 2018
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Chapter 1 Review
Learning Objective Review
Learning Objective 1: Identify the uses and users of accounting information
- Purpose of accounting is to provide useful information for decision-making
- Two types of decision makers
o Internal users
o External users
- Internal users are managers, who work for the business and need internal
accounting information to manage and run its operations
- External users are investors and lenders and other creditors
o Investors (existing and potential shareholders) use accounting information
to help decide whether to buy, hold or sell shares
o Lenders (such as bankers) and other creditors (such as suppliers) use
accouting information to evaluate the risk of lending money or granting
credit to a business
o Others include non-management employees, customers, regulators,
taxing authorities
Learning Objective 2: Describe the primary forms of business organization
- Three types of business organizations
o Proprietorships
▪ A business owner by one person
o Partnerships
▪ A business owner by two or more people
o Corporations
▪ Separate legal entity whose shares provide evidence of ownership
▪ Can be public – shares trade on a stock exchange
▪ Can be private – share are closely held and do not trade on a stock
exchange
- Generally accepted accounting principles are a common set of guidelines that
are used to record and report economic events
o Can differ depending on the form of business organization
o Public corporations follow (IFRS)
o Private corporations choose between ASPE or IFRS
o Proprietorships and partnerships usually use ASPE
Learning Objective 3: Explain the three main types of business activity
- Financing activities involve obtaining the necessary funds (through the issue of
equity or the assumption of debt) to support the business
o Also includes repayments of debt, declaration & payment of dividends,
and share repurchases
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Document Summary
Learning objective 1: identify the uses and users of accounting information. Purpose of accounting is to provide useful information for decision-making. Internal users are managers, who work for the business and need internal accounting information to manage and run its operations. External users are investors and lenders and other creditors. Learning objective 2: describe the primary forms of business organization. Learning objective 3: explain the three main types of business activity. Financing activities involve obtaining the necessary funds (through the issue of equity or the assumption of debt) to support the business: also includes repayments of debt, declaration & payment of dividends, and share repurchases. Investing activities primarily involve purchasing the long-term assets (such as property, plant, and equipment) that are needed to run the business, but also include the disposition of these items. Operating activities involve putting the resources of the business into action to generate net income.
