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Canada (161,809)
Accounting (74)
ACTG 1P12 (1)
Chapter 1

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Glenn Skrubbeltrang

Financial Chapter 1 Accounting – what and why? I. Accounting is the language of business II. Ethical behavior - Behavior guided by a set of principles on what is “right and wrong” III. Business: a collection of people, capital and other resources organized in a matter to achieve an intended purpose or goal a. Most businesses have a goal to be profitable b. All businesses compete for capital - from investors (owners) or from creditors (lenders) IV. For and Not-For Profit Organizations a. A for-profit organization incurs expenses in order to generate revenue b. A not-for-profit organization generates revenue in order to allow it to incur expenses V. Financial Statements - Communicate financial information (performance) about a business, historical information to internal and external users. The nature of business operations I. Four types of businesses a. Service organization – provides services b. Merchandising business – buys goods, adds value to them, then sells them c. Manufacturer – makes the products it sells d. Financial services company – doesn’t make tangible products and doesn’t sell products made by other companies; deals in services related to money Ownership structure of a business I. Business ownership usually takes one of three forms a. Sole proprietorships (single person) i. Not separate from its owner in terms of responsibility and liability ii. Not a separate taxable entity iii. The business is the owner and the owner is the business b. Partnerships (2 or more) i. Similar to a sole proprietorship – taxed @ personal level ii. Not separate from the owners in terms of responsibility and liability c. Corporations i. Legally separate and financially separate from the owners ii. Ownership in a corporation is divided into units called shares of capital stock iii. Owners are called shareholders or stockholders iv. Corporations are separate legal and taxable entities Q: What are the advantages and disadvantages of each of the different forms of business ownership? Q: What is a limited liability partnership (LLP)? BUSINESS ENTITY CONCEPT - Only the business’ financial affairs should be reported in the financial statements. The personal transactions of the business owners are kept separate from business The Accounting Profession I. Financial accounting serves primarily external user an is governed by accounting standards a. International Financial Reporting Standards (IFRS) for publicly accountable enterprises b. Accounting Standards for Private Enterprises (ASPE) for private enterprises c. Canadian Instituted of Chartered Accountants (CICA) sets rules to follow for the accounting profession in Canada Financial Chapter 1 Overview of Accounting Standards I. Underlying Assumptions a. Accrual basis accounting i. Record transactions as they occur, not when the cash is received or paid out b. Going-concern principle i. Business is assumed to continue opera
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