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COLLEGE ACCOUNTING CH 1

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Title: COLLEGE ACCOUNTING CH 1


1

College Accounting First Canadian
Edition Price Haddock Brock Hahn
Reed
McGraw-Hill Ryerson
1
2
The Accounting Cycle
2
3
CHAPTER 1
ACCOUNTING The Language of Business
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4
  • ACCOUNTING
  • is the Language of Business
  • is used to gather and communicate financial
    information about an organization.

4
5
  • ACCOUNTING
  • this information is used by owners and managers
    to make decisions that will build and improve the
    business

5
6
OBJECTIVE 1 Define Accounting
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ACCOUNTING DEFINED The process by which
financial information about a business is
recorded, classified, summarized, interpreted,
and communicated to owners, managers, and other
interested parties.
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OBJECTIVE 2 Explain why it is important to
study accounting
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  • THREE PROFESSIONAL ACCOUNTING BODIES IN CANADA
  • . Certified General Accountants of Canada (CGA)
  • Society of Management Accountants of Canada (CMA)
  • Canadian Institute of Chartered Accountants (CA)

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FINANCIAL INFORMATION NEEDED
  • How much cash does the business have?
  • How much money do customers owe the business?
  • What is the cost of the merchandise sold?

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FINANCIAL INFORMATION NEEDED (Continued)
  • How much did the volume of sales increase?
  • What is the amount owed to suppliers?
  • How much profit has the firm made?

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OBJECTIVE 3 Identify who needs to
receive financial information
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USERS OF FINANCIAL INFORMATION
  • Owners and Managers
  • Suppliers
  • Banks
  • Tax Authorities
  • Regulatory Agencies and Investors
  • Customers
  • Employees and Unions



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OBJECTIVE 4 Describe generally accepted
accounting principles
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GAAP
  • Generally Accepted Accounting Principles

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GAAP
  • Include specific rules, practices and procedures
    as well as broad underlying concepts and
    conventions.

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Historical Cost Basis of Measurement
  • Transactions and events are recognized in
    financial statements at the amount of cash or
    cash equivalents paid or received when they took
    place.

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USE OF GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES To ensure that generally accepted
accounting principles are followed by publicly
owned corporations, the stock exchange requires
that financial information, in the form of
financial statements, be submitted annually.
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OBJECTIVE 5 Compare the three types of business
entities
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ENTITY Anything having its own separate identity,
such as an individual, a town, a university, or a
business.
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ENTITY ASSUMPTION
  • The concept of keeping a firms financial
    records separate from the owners personal
    financial records.

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SOLE PROPRIETORSHIP
  • A business entity owned by one person.
  • Ends when the owner quits or dies.
  • Owner is legally responsible for the debts and
    taxes of the business.

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PARTNERSHIP
  • A business entity owned by two or more people who
    are legally responsible for the debts and taxes
    of the business.
  • Ends when one of the partners leave the
    partnership.

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CORPORATION
  • A publicly or privately owned business.
  • Owned by stockholders.
  • Does not end when ownership changes.
  • Shareholders are not responsible for the debts or
    taxes of the corporation.
  • Financial affairs of the shareholders must be
    kept separately from the corporation.

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OBJECTIVE 6 State the steps in the accounting
cycle
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ACCOUNTING CYCLE
1. RECORD
5. COMMUNICATE
2. CLASSIFY

3. SUMMARIZE
4. INTERPRET
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ACCOUNTINGCYCLE
  • RECORD
  • in journal
  • CLASSIFY
  • in a ledger
  • SUMMARIZE
  • in financial statements
  • INTERPRET
  • COMMUNICATE


All transactions
27
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