accounting chapter 2 section 1 chapter 2: exploring the business world
TRANSCRIPT
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Accounting Chapter 2 section 1
Chapter 2: Exploring the business world
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Objective: To learn more about the business environment
Objective: To learn more about the business environment and how accounting relates the environment
Goal: Our goal form this lesson is to know the three type of business operations and the three forms of business ownership.
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Free enterprise system
Free enterprise system – People are free to produce the goods and services they choose.
Profit – The amount of money earned over and above the amount spent to keep the business operating
Loss – If businesses spend more many than they earn
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Entrepreneurship
Entrepreneurs – transform ideas for products or services into real-world businesses
The “Self-made” Man, or Woman
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Three types of Business Operations
Service Business
Merchandising Business
Manufacturing Business
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Service Business
Service Businesses provide a service for a fee
Ex: Hair salons, Travel Agencies, Consulting Firms, Real Estate Agencies, etc.
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Merchandising Business
Merchandising business buys finished products and resells them to individuals or other businesses.
Ex: JC Penney, Walmart, Target, etc.
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Manufacturing Business
Manufacturing businesses buy raw materials, such as wood or iron, and transforms them into finished products through labor and capital
Think “Factory”….
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Three types of Business Operations
Service Business - provide a service for a fee
Merchandising Business - Merchandising business buys finished products and resells them to individuals or other businesses.
Manufacturing Business - Manufacturing businesses buy raw materials, such as wood or iron, and transforms them into finished products through labor and capital
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Sole Proprietorship
A business that is owned by one person
Advantages
Easy to set up
All profits go to owner
Owner has total control
Few regulations to follow
Disadvantages
Limited Expertise
Hard to raise money (capital)
Owner has all of the risk
(Liability)
Hard to attract talented employees
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Partnership
A partnership is a business owned by two or more persons called partners.
They agree to operate the business as co-owners.Advantages
Easy to start
Skills and talents are pooled
More money available
Disadvantages
Conflicts between partners
Profits must be shared
Owners share all the risk (Liability)
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Corporation
A corporation is a business organization that is recognized by law to have a life of its own.
Needs legal permission, called a charter, which gives a corporation certain rights and privileges
A corporation is like its own person, the business is different than the owners
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Corporation
Advantages
Easier to raise money (capital) (issue stocks)
Easier to expand
Easy to transfer ownership
Losses limited to the investment
Disadvantages
Costs more to start up
Complex to organize
More regulation
Higher taxes
Double Taxation
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Chapter 2, Section 2
Accounting: The Universal Language of Business
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The Accounting System
An Accounting System is designed to collect, document, and report on financial transactions affecting the business.
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Financial Accounting
The purpose of Financial Accounting is to report the companies earnings to the public through financial reports
These reports are called Financial statements
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Financial Statements
Apple’s financial statements
http://finance.yahoo.com/q/bs?s=AAPL&annual
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GAAP “Generally Accepted Accounting Principles”
It is pronounced as “GAP”
These are the rules by which financial accounting
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Managerial Accounting
Focus on information for management, it is the accounting for internal users of accounting information.
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Chapter 2 Vocab
Business Entity – exists independently of its owner’s personal holdings
Accounting period – A period of time covered by an accounting report
Going concern – The assumption that a business will go on and survive forever