ACCT 200 1st Edition Lecture 2 Outline of Last LectureI. Types of AccountingII. StakeholdersIII. Accounts and Financial StatementsOutline of Current LectureI. ReviewII. What is a Business?III. Forms of BusinessIV. Cost EmphasisV. Business CycleVI. EthicsCurrent LectureI. Reviewa. Assets—things owned by a business, provide future valueb. Liabilities—amounts owed to someone by a businessc. Equity—ownership of a companyd. Revenues—sales earned (**earned=revenues)e. Expenses—incurred, used up assetsf. Dividends—payment/distributions of cash to stockholdersNOT EXPENSESg. Operating—day to day activities, short term (less than 1 year)h. Investing—long term stuff (greater than 1 year)i. Financing—ways to initially acquire capital for a companyi. Stock—positive ii. Debt—negative b/c this is a liabilityII. What is a Business? A business sells goods/services to earn profita. Service Business: provides services to customershair salon, plumbing company, etc.b. Merchandising Business: buys finished goods from suppliers and sells them to consumersWalmart, Belk’s, etc.c. Manufacturer Business: buys inputs and converts them into productsHonda factory, Apple, etc.III. 4 Business Formsa. Proprietorship—not separate legal entity; “full liability”b. Partnership—proprietorship with partners; separate legal entity from partners but each general partner is responsible for other partner’s actionsc. Corporation—can issue stock (stock is not revenue), separate legal entityd. Limited Liability Company (LLC)—cannot issue stock, but typically raise more money than proprietorship (ex. Lawyers, doctors, etc.)IV. Cost Emphasisa. Low cost emphasis—companies that offer acceptable quality for a bargainprice Kia, Hyundai, Walmartb. Premium Price Emphasis—companies that offer exceptional quality for a little heavier price tag Lexus, BMWV. Business Cyclea. Financing—attaining money to make your business runi. Debtliabilityii. Capital stockb. Investing—acquiring assets with which to develop your companyc. Operating—doing something with the money; offering goods/services**Wage expense versus wages payable—wage expenses are used up (paid immediately in cash) while wages payable are to be paid in the futureVI. Ethicsa. GAAP: Generally Accepted Accounting Principles—set of principles used in the United States by businessesb. FASB: Financial Accounting Standards Board—the board that writes GAAP,but they have no authority to enforce the rulesc. SEC: Securities and Exchange Commission—responsible for enforcement of rules for public U.S. companies (*publicmeans you can buy their stock at New York Stock Exchange)d. IASB: International Accounting Standards Boardbridge international gapfor these rulese. GAAP conceptsi. Business entity concept—owners separate from businessii. Cost concept—historical cost means purchase priceiii. Going concern—will be in business indefinitelyiv. Matching concept—match revenues with expensesv. Objectivity concept—everything objective, shows what you actually paid for somethingvi. Unit of measure—ours is the U.S. dollarvii. Accounting period concept—keep times separateviii. Adequate disclosure concept—display enough info to make an accurate