Accounting Unit 1 Content

asset

something that has value and can be sold

liability

the state of being legally obliged and responsible (ie: Debt, money that you must pay back to another person, business, institution for purchases or services rendered in the past)

capital

Is the total value of assets minus the liabilities. The difference represents the Capital for business or a person (Net Worth)

revenue

Income. Money earned for doing business, selling goods, or performing services

6 parties interested in accounting

The parties include owners, creditors, investors, the government, managers, as well as yourself/employees

why is the government interested in accounting

The government wants to know sales and earnings so they know what to tax people and businesses

functions of an accountant

interpreting and communicating financial data and advice

cpa

certified public accountant.they provide advice on financial matters, as well as preparing and filing tax reports

what would an institutional accountant work for

an institution (ie: educational facility, government office, hospital)

4 types of businesses

1. service business
2. merchandising business
3. manufacturing business
4. non-profit organizations

service business

concerned about the building of service systems in order to deliver value to their customers and to act in the roles of service provider and service consumer

merchandising business

sells tangible goods to consumers at a higher price than what they were originally purchased for

manufacturing business

creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation

non-profit organization

a legal entity organized and operated for a collective, public or social benefit, in contrast with an entity that operates as a business aiming to generate a profit for its owners

sole proprietorship

a type of enterprise owned and run by one person and in which there is no legal distinction between the owner and the business entity

partnership

a cooperative relationship between people or groups who agree to share responsibility for achieving some specific goal (launching a business)

corporation

a business firm whose articles of incorporation have been approved in some state

franchise

an authorization granted by a government or company to an individual or group enabling them to carry out specified commercial activities (ie: providing a broadcasting service or acting as an agent for a company's products)

franchisor

an individual or company that sells or grants a franchise for the sale of goods and/or services

franchisee

an individual or company that holds a franchise for the sale of goods or the operation of a service

what are creditors

preditors

going concern

assumes the business will continue into the foreseeable future

monetary unit

only data that can be expressed in terms of a stable monetary unit is included in the accounting records (the monetary unit in Canada is the Canadian dollar)

economy entity

each business is distinct from its owner or owners, and each business will also be considered as distinct from any other business

time period assumption

the ongoing life of the business is divided into time periods. Time periods include: fiscal years (e.g., April 1 to March 31), semi-annual periods, quarters, and months.

cost principle

the cost principle dictates that items purchased by the business are recorded and remain at their original cost

consistency principle

although there are general accounting rules, there may be several ways to apply those rules. The specific accounting methods used by a business are to be used in the same way from one period to the next. If a method is changed, it must be disclosed or made known

objectivity principle

accounting entries will be based on fact and not on personal opinion or feelings

fixed asset

assets which are purchased for long-term use and are not likely to be converted quickly into cash, such as land, buildings, and equipment

creditor

a person or business that has extended credit or loaned money to another individual or business

financial position

is the financial status of a person or company represented by the assets, liabilities, and net worth or personal equity

source documents

the original document that contains the details of a business transaction

proof of transaction

evidence that identifies the supplier, the date of the supply and the goods or services supplied to a purchaser