UT Knoxville ACCT 200 - Chapter 1 (19 pages)

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Chapter 1



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Chapter 1

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Pages:
19
School:
University of Tennessee
Course:
Acct 200 - Foundations of Accounting
Foundations of Accounting Documents

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1 The Role of Accounting in Business Chapter 1 A200 Survey of Accounting University of Tennessee 2 Ch 1 The role of Accounting in Business Accounting is the language of business It provides information to both external and internal stakeholders so they can 1 evaluate the company s current health 2 evaluate the company s future prospects Financial Accounting gives historical information to external stakeholders about 1 changes in financial condition during a period three financial statements Income Statement Statement of Retained Earnings Statement of Cash Flows 2 financial condition at a single point in time one financial statement Balance Sheet Managerial Accounting gives forward focused information to internal stakeholders so they can make decisions about the future 1 projected financial statements 2 daily progress reports 3 Ch 1 Business Types Business An organization that sells goods or services to customers A200 focuses on businesses that are operated to earn a profit Many of the same Accounting rules apply to not for profit businesses Service business Provides services to customers human knowledge talent or strength Does not sell goods Merchandising business Buys finished goods from manufacturers and sells them to customers Also called a middleman Manufacturing business Buys basic inputs materials labor and overhead from suppliers Converts them into finished goods for sale to customers usually merchandisers All three business types can operate in any of four business forms Ch 1 Business Forms Proprietorship Owned by one individual owner Organization easy and inexpensive Resources limited to cash or other assets the owner can contribute or borrow Entity not a separate legal entity from owner owner is liable for all business debt no limited liability Income Tax one level of taxation owner pays tax individually on business income Partnership Owned by more than one individual or entity partners Organization fairly easy and inexpensive Resources partnerships can



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