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Bat4M ' Summary of Study Objectives p.30: CHAPTER 1: Accounting in Action

accounting, pay roll, Accounting and management. provides excellent understanding of accounting princliples. Ch 1 Summary of Study Objectives SO1-8, p.30

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41 views

Bat4M ' Summary of Study Objectives p.30: CHAPTER 1: Accounting in Action

accounting, pay roll, Accounting and management. provides excellent understanding of accounting princliples. Ch 1 Summary of Study Objectives SO1-8, p.30

Uploaded by

nadayegoya_686384374
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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BAT4M

`CHAPTER 1: Accounting in Action Summary of Study Objectives p.30

1. Explain what accounting is. Accounting identifies, records, and communicates the economic events of an organization to interested users. 2. Identify the users and explain the uses of accounting. The major users and uses of accounting are: (a) Management uses accounting information to plan, control, and evaluate business operations. (b) Investors (owners) decide whether to buy, hold, or sell their financial interests on the basis of accounting data. (c) Creditors (suppliers and bankers) evaluate the risks of granting credit or lending money to particular businesses on the basis of the accounting information. Other groups that use accounting information are taxing authorities, regulatory agencies, customers, labour unions, and economic planners. 3. Understand why ethics is a fundamental business concept. Ethics are the standards of conduct by which one's actions are judged as right or wrong. If you cannot depend on the honesty of the individuals you deal with, effective communication and economic activity will be impossible and information will have no credibility. 4. Explain the meaning of generally accepted accounting principles and the cost principle. Generally accepted accounting principles are a common set of standards used to prepare and report accounting information. The cost principle states that assets should be recorded at their historical (original) cost. 5. Explain the meaning of the going concern, monetary unit, and economic entity assumptions. The going concern assumption presumes that a business will continue operations for enough time to use its assets for their intended purpose and fulfill its commitments. The monetary unit assumption requires that only transaction data that can be expressed in terms of money be included in the accounting records. The economic entity assumption requires that the activities of each economic entity be kept separate from the activities of its owner and other economic entities. 6. State and utilize the basic accounting equation and explain the meaning of assets, liabilities, and owners equity. The basic accounting equation is: Assets = Liabilities + Owner's Equity Assets are resources owned by a business. Liabilities are creditorship claims on total assets. Owner's equity is the ownership claim on total assets. 7. Calculate the effect of business transactions on the basic accounting equation. Each business transaction must have a dual effect on the accounting equation. For example, if an individual asset is increased, there must be a corresponding: (1) decrease in another asset, (2) increase in a liability, and/or (3) increase in owner's equity. 8. Understand what the four financial statements are and how they are prepared. An income statement presents the revenues and expenses of a company for a specified period of time. A statement of owner's equity summarizes the changes in owner's equity that have occurred for a specific period of time. A balance sheet reports the assets, liabilities, and owner's equity of a business at a specific date. A cash flow statement summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time.

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