Accounting chapter 1

Accounting is a system of dealing with financial data that provides information for decision making.​

Five Main Activities:​

  1. Gathering financial information about the activities of a business or other organization​

  2. Preparing and collecting permanent records which provide evidence of purchase, proof of payment, details of payroll, etc.​

  3. Rearranging, summarizing and classifying financial information into a more useable form​

  4. Preparing information reports and summaries for the following purposes:​

  • To help management make decisions​

  • To serve the needs of groups outside the business, such as bankers and investors​

  • To measure the profitability of the business​

  1. Establishing controls to promote accuracy and honesty among employees. As businesses grow, owners cannot take a daily role in all aspects of their businesses so they hire employees to help them.​

    1. Service Businesses - provides/sells a service to the public​

Examples: ​

Movie theatre Hair salon Physiotherapy clinic ​

Accounting firm Catering company​

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2. Merchandising Businesses – buys goods and resells them at a higher price​

Examples: ​

Motorcycle dealership Clothing store Video game store ​

Sporting goods store Grocery store ​

3. Manufacturing or Producing Businesses – buys raw materials and converts them into a new product​

  1. ​

Examples: ​

Computer manufacturer Car manufacturer ​

Food-processing company Farm equipment manufacturer​

  1. ​

4. Non-Profit Organizations – carry on activities to meet social needs not for profit​

Examples: ​

Religious organization Charity ​

Amateur sports organization ​

Forms of Business Ownership ​

  1. ​

1. Sole Proprietorship – one owner​

Examples: ​

Dr. Joe Dimitry, Dentist Rosa’s Pizza​

Alf’s Home Bakery Rustic Pottery—Miriam Daily, owner ​

2. Partnership – more than one owner​

Examples: ​

McPherson & Scott, Chartered Accountants​

Bucchino & Magalli, Barristers and Solicitors​

Hakala and Sons Service Centre​

Café Crème—Solange Dion and Alex Boucher Owners​

3. Limited Company or Corporation – owned by shareholders​

  1. ​

Examples: ​

Pool People Ltd. ​

Uni Electrical and Mechanical Ltd. ​

Gunn’s Auto Service Ltd. ​

Building Resources Ltd., Construction Consultants ​

​Categories of Accounting Work​

  1. Routine Daily Activities—activities that occur in the same way nearly every day of the year--processing bills, preparing cheques, daily banking, recording transactions, preparing business papers, etc.​

  2. Periodic Accounting Activities—activities that occur at regular intervals--payroll cheques, bank reconciliations, financial reports​

  3. Miscellaneous Activities—activities that cannot be predicted—e.g. if an employee resigns, the position must be filled quickly; an accounts receivable or payable might call with a question about their account, the bank might have a question about the business’ account​

Becoming a Professional Accountant​

CA (Chartered Accountant), CGA (Certified General Accountant), CMA (Certified Management Accountant) designations amalgamated into one organization CPA (Chartered Professional Accountant).​

​Roles in Accounting​

Accounting Clerk work is clerical in nature and for the most part routine matters (often called bookkeeping).​

Accountant is broader in scope and requires more education. A professional account is responsible for maintaining the entire accounting system. They use the financial information to make business decisions.​