Textbook Notes (363,229)
Canada (158,274)
Accounting (526)
ACC 110 (66)
Chapter 1

Chapter 1

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Ryerson University
ACC 110
Brad Mac Master

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 - Demand for powerful users - Securities legislation Stakeholders - An owner (or part-owner); holds shares
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