ACCT NOTES – CHAPTER #1
- The information system that identifies and records the economic events of an organization, and
then communicates them to a wide variety of interested users.
Users and Uses of Accounting
Users of accounting information can be divided broadly into two types: internal users and external users
- Managers plan, organize and run companies.
- They work for the company.
- Financial Accounting.
- Management Accounting
- Include: Finance directors, marketing managers, human resource personnel, production
supervisors, and company officers.
- Primary Users are:
3- Others: tax authorities, regulatory agencies, customers, labour unions, economic planners.
Forms of Business Organizations
There are three forms of business organization: proprietorship, partnership and corporation.
- A business owned by one person
- Simple to set up and gives control over the business
- The owner receives any profits, suffers any losses, and is personally liable for all debts of the
- There is no distinction between the owner and the business.
- Examples: salons, farms, small retail stores, plumbers, mechanics.
- Similar to proprietorship except with more than one owner.
- Typically used to organize retail and service business, including lawyers, doctors, architects,
engineers and accountants.
- As an investor in a corporation, you receive shares to indicate your ownership claim.
- Investing makes it easier for corporations to raise funds
- Shareholders have limited liability since they only risk losing the amount that they have invested
in the company’s shares.
- May be public or private corporations. - Public: commonly distribute their financial statements to shareholders, creditors, other
interested parties, and the general public upon request.
- Private: do not issue publicly traded shares
All businesses are involved in 3 types of activity: Financing, investing, and operating.
- Obtaining and repaying funds to finance the operations of the business
- Examples: borrowing