This document provides an overview of key accounting concepts and principles including: - Accounting measures and communicates financial information as the language of business. It has internal and external users. - There are three main fields: management, financial, and public sector accounting. Standards are set by groups like FASB, SEC, and AICPA. - Business organizations can be proprietorships, partnerships, or corporations, each with advantages and disadvantages. - Key concepts include the accounting equation, GAAP, revenues/expenses, and preparing financial statements like the income statement, balance sheet, and statement of cash flows to evaluate business performance.

1. Accounting and the Business Environment Chapter 1

3. Accounting... is an information system that... measures business activities, processes information, and... communicates financial information.

4. Accounting... is called the language of business.

5. Users of Accounting Information External users make decisions about the entity. Internal users make decisions for the entity.

6. Fields of Accounting Management Accounting Financial Accounting

7. The Authority Underlying Accounting Public Sector (SEC) Private Sector (FASB) Private Sector (AICPA) (IMA) GAAP

8. Standards of Professional Conduct AICPA’s Code of Professional Conduct Standards of Ethical Conduct of the Institute of Management Accountants

9. Types of Business Organizations Proprietorships Partnerships Corporations

18. The Reliability (Objectivity) Principle Information must be reasonably accurate. Information must be free from bias. Information must report what actually happened. Individuals would arrive at similar conclusions using same data.

19. The Cost Principle Assets and services acquired should be recorded at their actual cost.

20. The Going Concern Concept The entity will continue to operate in the future.

21. The Stable-Monetary-Unit Concept The dollar’s purchasing power is relatively stable.

23. The Accounting Equation Economic Resources Claims to Economic Resources Assets = Liabilities + Owner’s Equity

27. Transactions that Affect Owner’s Equity OWNER’S EQUITY INCREASES OWNER’S EQUITY DECREASES Owner Investments in the Business Revenues Expenses Owner Withdrawals from the Business Owner’s Equity

34. Accounting for Business Transactions Owner’s Assets = Liabilities + Equity 1) Cash + $30,000 + $30,000 2) Cash – 20,000 Land + 20,000 3) Supplies + 500 + 500 4) Cash + 5,500 + 5,500 5) Receivable + 3,000 + 3,000 6) Cash – 3,300 – 3,300 7) Cash – 300 – 300 Totals + $35,400 + 200 + $35,200

38. Financial Statements... – are the final product of the accounting process. – tell how the business is performing and where it stands.

42. Relationships Among the Statements: Statement of Owner’s Equity G. Gillen, capital, April 1, 20xx $ 0 Contribution of capital 30,000 Net income $ 5,200 Cash distributions – 2,000 G. Gillen, capital, April 30, 20xx $33,200

43. Relationships Among the Statements: Balance Sheet Assets Cash $19,900 Accounts receivable 2,000 Supplies 500 Land 11,000 Total assets $ 33,400 Liabilities Accounts payable $ 200 Owner’s equity, G. Gillen, capital 33,200 Total liabilities and owner’s equity $33,400

46. End of Chapter 1