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Chapter 1

ACC 110 Chapter Notes - Chapter 1: Nonprofit Organization, Financial Statement, Trade Union


Department
Accounting
Course Code
ACC 110
Professor
Brad Mac Master
Chapter
1

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Accounting Chapter 1
Accounting: Is a system for gathering data about an entity’s economic activity and then
processing and organizing the data to communicate it to people who want/needs it for decision
making.
Entity: Is an economic unit such as an individual, proprietorship, partnership, corporation, non-
profit organization and government. In an accounting environment, an entity is an economic unit
that a stakeholder wants accounting information about
- No two entities are identical, each are unique
Financial Accounting
-Provides information to people who are external
-Investor, leaders, tax authorities
-Rely on the entity to provide information
Managerial Accounting
-Information needs and decision of manager (internal)
-Operating decision: price, expansion, product successfulness, amount produce
Why does accounting matter: Choose among alternative ways of accounting for transaction
and economic events -> significant economic consequence
-Country’s institution influence the way people live their lives
Corporation
-Legally separate from its owners
- Ownership represent by share
-Shareholder = owners of shares
-Provides limited liabilities to amount of investment (shareholders aren’t liable for obligation)
-Shares of public organization can be purchased by anyone (traded on a stock exchange)
-Private corporations aren’t available for purchase unless agreed by its shareholder or entity
Proprietorship
-Unincorporated business with one owner
-Owner is personally liable for debts of business
-Easy and inexpensive to set up
Partnership
-Unincorporated business owned by 2 or more entities called partners (people or corporations)
-Liability depend on structure
-Partner agreement -> cost and complexity
-Earning included in partner’s income
Non-profit Organization
-Provide social, educational, professional, religious, health, charitable and other services in
communities.
-Examples: hospitals, charities, religious organizations, unions, clubs, daycare centres and
universities
-Can incorporate and provide members with limited liability
Individuals
-Filing an income tax return
-Keeping track of finances
-Borrowing money from banks (may request finance information)
-Insuring homes and belongings (estimate value for them – insurance and list of personal
belongings)
-Preparing budgets
Constraints on Entities
-Income Tax act (economic events/certain transaction must be accounted for amount income
tax an entity must pay)
-Corporations
-Follow GAAP or IFRS
-Ethical/mural consideration
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