Accounting involves gathering financial information, preparing records, and analyzing and reporting data to help answer important business questions about profitability, pricing, inventory levels, and more. It also provides information to owners, lenders, and others evaluating a company's performance and financial health. Studying accounting offers personal and career benefits as it is important for daily life, many occupations, and is essential for establishing and maintaining successful businesses.

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1.1 What is Accounting?

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There are 5 Main activities involved
in accounting:
1. Gathering financial information
2. Preparing and collecting permanent records.
3. Rearranging, summarizing, and classifying
financial information
4. Preparing information reports and summaries
5. Establishing controls

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Accounting Helps Businesses
Answer Questions
 Is the business earning enough
profit?
 Are the selling prices of the
products high enough?
 What is the value of all the goods
for sale?
 Every business requires
good financial
information to make
good decisions.
 By enabling financial
information to be
gathered and prepared,
a good accounting
system provides the
answers to many
questions
 To whom was cheque No. 333
issued?
 How much did John Doe earn
last year?
 Are our customers paying their
bills on time?

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Accounting can also help Answer
Questions
Other persons, companies or organizations might seek answers to the
following questions:
 Should I lend money to this business?
 Should I buy into this business?
 Should I sell this business?
 Is the business well run?
 Is the company growing satisfactorily?
 Can the business afford to pay more to its employees?
 Is the business paying the proper amount of income tax?

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Accounting Term:
Accounting Records
 Accounting Records are orderly records of the financial
activities of a business.
 Bookkeepers and Accountants both work with Accounting
records.

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Compare
 involves the planning and
keeping of accounting records.
There may be some analyzing
and interpreting involved but
not to the extent of accounting.
 Bookkeeping is the
recording, posting , and
proving of the financial data.
Bookkeeping takes place
before accounting takes
place.
 is the planning, keeping,
analyzing and interpreting of
accounting records.
 Accounting is the
establishing and maintaining
of the entire accounting
system, the interpreting of
the results of the recorded
data, and the assisting in the
management or decision-
making aspects of the
organization.
Bookkeeping Accounting

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The Accounting Clerk (Bookkeeper)
The work of an accounting clerk is clerical in nature
and mostly concerned with routine matters.
 ensures that transactions are properly recorded with
supporting documents
 records the accounting entries in the books of account and
balances the ledger
 makes payroll calculations, payroll cheques and other
payroll records
 carries out all necessary banking transactions

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The Accountant
The work of an accountant is broader is scope and
requires more education and experience.
 develops a system to ensure that correct data are entered into the
accounting system
 ensures that generally accepted accounting standards are met
 interprets data produced by the accounting system
 prepares reports based on data
 participates in management meetings
 supervises the work of all accounting employees

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Bookkeeper or Accountant
Who does the following types of work?
 Ensuring that transactions are properly
recorded and supporting documents are present
and correct.
 Carrying out necessary banking transactions.
 Developing a system to ensure correct data are
entered into an accounting system.
 Recording the accounting entries and balancing
the ledger
 Interpreting data produced by the accounting
system.
 Participating in management meetings are
assisting in making business decisions.
Bookkeeper
Bookkeeper
Accountant
Bookkeeper
Accountant
Accountant

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Accounting is the Language of Business

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Why Study Accounting?

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Personal Benefits
 Budgeting
 Investments
 Keeping track of financial records – ex. Bank Account
 Income Taxes
 Payroll deductions
 Mortgages and Loans
How can an understanding of accounting be beneficial
to a persons daily life

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Career Benefits
 Daily Banking
 Amounts owed by customers
 Producing Income Statements
 Preparing Payroll
How could an understanding of Accounting be
beneficial in many different careers?

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Business Careers
 VERY!
 Business and Entrepreneurialism is growing
 Every business must account for its financial activities
 Financial activities determine whether the business grows or
even whether the business even continues.
 Accounting information is critical.
 Inaccurate accounting records could easily contribute to
business failures and a lot of unnecessary stress!
How important is an understanding of Accounting to
any Business?

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Accounting as a Profession
Canada has 3 national professional accounting organizations
 Chartered Accountant (CA)
 Certified General Accountant (CGA)
 Certified Management Accountant (CMA).
Each profession requires you to complete a prescribed course
usually after you have completed a university degree.
Note: As of January 2013, CA’s and CMA’s have integrated into
one professional group – Chartered Professional Accountants
Canada. CGA’s are joining this group this year.

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Working Accountants
1. Public accountant
 serves the general public for a fee, much like a doctor or
lawyer does.
 The main type of work done by public accountants is
auditing.
 Auditing is the examination and testing of the books,
records, and procedures of a business in order to be able
to express an opinion about its financial statements.
Two working categories:

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Working Accountants
2. Professional accountant
 may choose industrial or institutional accounting
 Industrial accountants work for large companies such as
Ford or Microsoft.
 Institutional accountants work for the government, banks,
large insurance companies and similar organizations.
Two working categories:

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Assignment.
 See Blackboard for Details.