Financial Accounting - chpt 1

What is the main objective of a business?

To provide goods/services to customers with the goal of earning a profit

What are the 3 types of businesses + how do they differ?

1. Service - provide services

2. Merchandising - buy products & reselling them

3. Manufacturing - make products to sell

What are the 3 main types of business activities?

1. Operating - day to day

2. Investing - money you put in to help the business

3. Financing - Investors, issuing stock, loans, etc…

What are operating activities?

Day-to-day activities to run the businesses and bring in revenue

What are investing activities?

Activities that include getting or disposing of long-term assets used by the business

What are financing activities?

Activities that include getting or providing funds for the business (investments from stockholders or borrowing)

What is accounting?

An information system that measures, records, and reports financial info about a business to help the users make decisions.

Why is accounting called the “language of business”?

Accounting communicates financial information that helps a business make better decisions.

What’s the difference between financial and managerial accounting?

• Financial - provides info to external users (outsiders)

• Managerial - provides info to internal users (People within…managers)

Why are ethics important in accounting and business?

• Financial info must be trustworthy so users can make informed decisions

• Being ethical creates integrity and trust to prevent misleading info

What 2 major factors influences ethical conduct?

• Individual character

• Company’s culture