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Management and Organizational Studies
Management and Organizational Studies 1023A/B
Maria Ferraro

09/18/13 MOS 1023 Introduction to MOS ll Accounting and Corporate Finance Why Study Accounting? Why Does Accounting Matter? - Accounting is the language of business - Global economic systems depend on reliable and accurate financial reporting Measures business activities - process data into reports (financial statements) - communicates results to decision makers -Good accounting is necessary for an economic system to work - Summarizes all the activities of a company for a time, summarize in to 4 or 5 statements - Something has happened to change the financial position of a company: did something change the value, how do I record it? Users and Uses of Accounting - Accounting identifies and records the economic events of an organization and communicates to interested users - There are two broad categories of users - Internal users - External users Users of Financial Information - Internal users - Managers plan, organize, and run a business - Various decisions: Pricing, Strategic(should I buy another company? expand in to another geographic area? shut down factory and outsource?), Marketing (want a promo? how long? is it worth superbowl sunday?), Employee Compensation(fixed salary? pay in commissions?), Capital budgeting (replace old equipment with new stuff?), Resource allocation - External users - Investors (shareholders) - Creditors - Others - Tax authorities (revenue Canada, doesn’t care about accounting rules) - Regulatory Agencies - Customers - Labour unions (can employees get raise, or benefits?) - Economic planners - Communities ▯ Focus on investors and creditors, primary users Ethical Behaviour - For accounting information to have value, preparer must have high ethical standards - Actions are legal and responsible - Consider organizations interests ▯ Could easily get people to invest if you don’t tell them the truth, easy for us not to ▯ share info. Information of symmetry? - Accountants, other professionals, and most companies have rules or codes of conduct to guide ethical behaviour - not necessarily going to be put in jail but can be reprimanded - Companies have rules of conduct Forms of Business Organizations Proprietorship - owned by one person - somebody has skillset then they’ll open up own business - Simple to set up - Owner has control over business - Unlimited liability - even though separate financial results from business, owners on the hook for all the liability, can take care/house to cover Partnership - Similar to proprietorship except owned by more than one person - adding, more money, investment to business - Formalized in a written agreement - Each partner has unlimited liability - can be on hook for debts partner incurred on business - Limited partnership - limits the liability to yourself Corporations - Get money from shares - Separate legal entity owned by shareholds (owners of shares) - Indefinite life - start corporations, leave, but the corporations will go on and on - Owners enjoy limited liability - shareholders, its a good thing cause if you buy shares and company is in debt, creditors cant come to shareholders, only limited to losing what you invested in - May be public or private: - depends on whether shares are publicly traded - can’t trade on stock market unless you’re a corporation Types of Businesses Manufacturing Business - Expertise buys in buying raw material, adding value to it, and produces final product that people want to buy ▯ Examples: GM, Coca-Cola, Boeing - Have huge investment in equipment, factory, land etc - Harder company to keep track of numbers - Management accounting - comes from manufacturing businesses Merchandising Businesses - Sell products, but don’t make it - Buy from manufacturing businesses, mark it up, sell it - Lower capital investments, less exposed to downturn than manufacturing business ▯ Examples: Walmart, Toys “R” Us, Best Buy, Amazon Service Businesses - Have merchandising component - Service company, but majority of money comes from providing services ▯ Examples: Disney, Air Canada - Selling you an experience - Difficulty with service is: once you lose a day of billing, it’s gone can’t make it up - Can’t inspect quality of product until after it’s done - Don’t have inventory on their books, because they’re not in business of selling 3 Types of Business Activities - Financing - Investing - Operating Financing Activities - Any economic decision/event that refers to obtaining or repayment of funds to finance the operations of the business ▯ Examples: Sharehold
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