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Chapter 1

BUSI 2150U Chapter Notes - Chapter 1: Accounting, Spreadsheet, Legal Personality


School
UOIT
Department
Business
Course Code
BUSI 2150U
Professor
Michael Konopaski
Chapter
1

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Accounting Notes
What is Accounting?
Accounting: A system for producing information about an entity and communicating
that information to people who want or need the information for making decisions
Cost/Benefit 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 costs.
Gather Data Process and Organize DataCommunicate information
Characteristics
Accounting isn’t a Science
Accounting isn’t precise or exact
Accounting doesn’t provide the “right” answer as there can be more than one
reasonable answer for many accounting situation.
Accounting is flexible
Accounting requires judgement.
Entity: An economic unit of some kind, such as a business, university, government, or
even a person.
Decisions that rely on Accounting information
Whether or not to buy a business and how much to pay
Calculate the amount of tax to pay
Evaluate whether to lend to a prospective borrower, and terms
Evaluate whether or not to expand a business
Evaluate how well managers have managed a business
Assess how well a business has performed
Decide whether or not to make a major purchase
Assess whether to make a product or to purchase it from an outside supplier, i.e.,
“make or buy”

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Why does Accounting Matter?
Economic Consequences: Affect’s peoples wealth and it can have an impact on the
decisions they make
*Lecture Note*
Accounting can occur in different ways through knowledge of Accounting to make
business’ profit
Government profits to be low to lower taxes
Bankprofits to be high to show they are trustworthy to borrow money from
Need for Accounting
In making a decision, you would generally give more weight to the information
that is most reliable and most relevant to your needs.
Can’t gather all info, Cost/Benefit off of gathering information
Must avoid information overload
*Lecture Note*
Rule of thumb you’re going to be using reports used for the average reader
You don’t go for sophisticated reading, ppl can be hired for it
Accounting System:
1.) Accumulate data
2.) Organize and Process data
3.) Convert data into useful information for stakeholders
Two Fields of Accounting
1. Financial Accounting
Provides information to the stakeholders who are external to an entity
Used for investment decisions
Follows conventional practices
Offers some consistency to users
E.g.) 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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2. Managerial Accounting
addresses the information needs and decisions of the stakeholders who are
internal to an entity (the managers and other employees.
Internal decision making Pricing of products, expansion plans, production
decisions
Rules are set by company No conventions to follow
E.g.) Spreadsheet, formulas, what point of sales do they breakeven
*Lecture Note*
Successful Businesses  Auto-recycling, ‘cause it’s world demand for the parts, many
potential customers
Conditions needed  Lots of customers who need the product or service, Cash Flow
(Repeating, recurring money coming to your pocket) from people who buy products
from e.g. Tim Hortons every day, constant stream of money from customers
The Accounting Environment
Four Key Components:
1) External environment
2) Characteristics of entities
3) Constraints faced by the entities
4) Stakeholders
*Lecture Note*
Context of UOIT
External environment  durham region, competitive environment
Characteristics of entities  competitive advantage of laptop based environment
Constraints  only increase tuition by 5% max (to all unis), increase of wages
each year,
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