ACCT 101 – Fundamentals of Accounting 1

Introducing Accounting in Business Overview: This chapter will mainly be a review for you, as you have covered most of the concepts in ACCT 100. You should spend your time reviewing the old concepts, and especially studying the new ones. What’s New in this Chapter? · The corporate form of business ownership. · Accounts that pertain to corporations, Common Stock, Retained Earnings, and Dividends. · Some accounting principles, or at least their names. · Two Financial Statements - Statement of Retained Earnings and Statement of Cash Flows. Accounting in Business: What you should already know: · Accounting is the “language of business.” · It is an information and measurement system that identifies, records and communicates relevant, reliable and comparable information about business activities in economic terms. · Three major accounting activities are identifying, recording, and communicating. · Users of accounting include external users and internal users. You should be able to provide examples of both. · Opportunities in accounting are abundant but can generally be categorized into financial, managerial, taxation, and other accounting-related jobs. · Ethics in accounting has been in the spotlight lately. · GAAP – Generally Accepted Accounting Principles are the rules that we will follow throughout the semester. FASB sets both broad and specific principles. SEC establishes reporting requirements for publicly held companies. The IASB identifies preferred accounting practices for international issues. · The accounting equation - see separate section below. · Transaction analysis Accounting Principles that you should familiarize yourself with: · The cost principle – Accounting information should be based on actual cost, which is measured on cash or equal to a cash basis. · The revenue recognition principle – provides guidance on when a company should recognize or record revenue. · Matching principle – A company must record its expenses incurred to generate revenue in the same period. · Full disclosure principle – Details must be reported so that users’ decisions can be informed.