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BUSI 2150U (16)
Chapter 1

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BUSI 2150U
Michael Konopaski

Accounting NotesWhat is AccountingAccounting A system for producing information about an entity and communicating that information to people who want or need the information for making decisionsCostBenefit Tradeoff The concept of comparing the benefits of an action with the costs of the action and taking action only if the benefits exceed the costsGather Data Process and Organize Data Communicate informationCharacteristicsAccounting isnt a ScienceAccounting isnt precise or exactAccounting doesnt provide the right answer as there can be more than one reasonable answer for many accounting situationAccounting is flexibleAccounting requires judgementEntity An economic unit of some kind such as a business university government or even a personDecisions that rely on Accounting informationWhether or not to buy a business and how much to payCalculate the amount of tax to payEvaluate whether to lend to a prospective borrower and termsEvaluate whether or not to expand a businessEvaluate how well managers have managed a businessAssess how well a business has performedDecide whether or not to make a major purchaseAssess whether to make a product or to purchase it from an outside supplier ie make or buyWhy does Accounting MatterEconomic Consequences Affects peoples wealth and it can have an impact on the decisions they make Lecture NoteAccounting can occur in different ways through knowledge of Accounting to make business profitGovernment profits to be low to lower taxesBankprofits to be high to show they are trustworthy to borrow money fromNeed for AccountingIn making a decision you would generally give more weight to the information that is most reliable and most relevant to your needsCant gather all info CostBenefit off of gathering informationMust avoid information overloadLecture NoteRule of thumb youre going to be using reports used for the average readerYou dont go for sophisticated reading ppl can be hired for itAccounting System1 Accumulate data2 Organize and Process data3 Convert data into useful information for stakeholdersTwo Fields of Accounting1Financial AccountingProvides information to the stakeholders who are external to an entityUsed for investment decisionsFollows conventional practicesOffers some consistency to usersEg Working or owning a business online and offered worldwide Global system is interconnected so more principles need to turn into rules to offer consistency to all
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