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Section 2Accounting: The Universal Language of Business
Section 2Accounting: The Universal Language of BusinessWhat You’ll Learn
How the accounting system works.
Who uses financial accounting reports.
Who uses management accounting reports.
How accounting is used to help make business decisions.
What assumptions provide the foundation for accounting systems.
What You’ll Learn How the accounting system works.
Who uses financial accounting reports.
Who uses management accounting reports.
How accounting is used to help make business decisions.
What assumptions provide the foundation for accounting systems.
Why It’s Important
Understanding accounting systems is
the key to understanding business.
Why It’s Important
Understanding accounting systems is
the key to understanding business.
Section 2 Accounting: The Universal Language of Business (con’t.)
Section 2 Accounting: The Universal Language of Business (con’t.)
Key Terms accounting system
manual accounting system
computerized accounting system
GAAP
financial reports
Key Terms accounting system
manual accounting system
computerized accounting system
GAAP
financial reports
financial reports
financial accounting
management accounting
business entity
accounting period
going concern
financial reports
financial accounting
management accounting
business entity
accounting period
going concern
The Accounting System
Designed to collect, document, and
report on financial transactions affecting
the business.
The Accounting System
Designed to collect, document, and
report on financial transactions affecting
the business.
Section 2 Accounting: The Universal Language of Business (con’t.)
Section 2 Accounting: The Universal Language of Business (con’t.)
manual accounting systemInformation is processed by hand.
computerized accounting systemFinancial information is recorded by entering it into a computer.
manual accounting systemInformation is processed by hand.
computerized accounting systemFinancial information is recorded by entering it into a computer.
The Accounting SystemThe Accounting System
Section 2 Accounting: The Universal Language of Business (con’t.)
Section 2 Accounting: The Universal Language of Business (con’t.)
generally accepted accounting principles (GAAP)A set of rules that all accountants use.
financial reportsSummarized information about the financial status of a business.
generally accepted accounting principles (GAAP)A set of rules that all accountants use.
financial reportsSummarized information about the financial status of a business.
How the Accounting System WorksHow the Accounting System Works
Section 2 Accounting: The Universal Language of Business (con’t.)
Section 2 Accounting: The Universal Language of Business (con’t.)
Inputs
SourceDocuments
Inputs
SourceDocuments
Processing
Tasks
Processing
Tasks
OutputsFinancial and Management Accounting
Reports
OutputsFinancial and Management Accounting
Reports Financial
Condition
Results of operations
Investments by and distributions to owners
Financial Condition
Results of operations
Investments by and distributions to owners
Analyzing
Classifying
Recording
Analyzing
Classifying
Recording
Checks
Invoices
Sales Slips
Receipts
Checks
Invoices
Sales Slips
Receipts
Using Accounting Reports for Making Business Decisions
There are two groups that use
accounting reports:
Using Accounting Reports for Making Business Decisions
There are two groups that use
accounting reports:
Section 2 Accounting: The Universal Language of Business (con’t.)
Section 2 Accounting: The Universal Language of Business (con’t.)
individuals outside the business
who have an interest in the
business
individuals inside the business
individuals outside the business
who have an interest in the
business
individuals inside the business
Financial Accounting
Financial accounting focuses on
reporting information to external users.
Financial Accounting
Financial accounting focuses on
reporting information to external users.
Section 2 Accounting: The Universal Language of Business (con’t.)
Section 2 Accounting: The Universal Language of Business (con’t.)
Who Uses Financial Accounting Reports?Who Uses Financial Accounting Reports? potential investors
banks that loan money to a business
local, state, and federal governments
workers, consumers, union leaders, and competitors
potential investors
banks that loan money to a business
local, state, and federal governments
workers, consumers, union leaders, and competitors
Management Accounting
Management accounting focuses
on reporting information to
management. Is accounting for
internal users.
Management Accounting
Management accounting focuses
on reporting information to
management. Is accounting for
internal users.
Section 2 Accounting: The Universal Language of Business (con’t.)
Section 2 Accounting: The Universal Language of Business (con’t.)
Managers Managers
Accounting AssumptionsAccounting Assumptions
Section 2 Accounting: The Universal Language of Business (con’t.)
Section 2 Accounting: The Universal Language of Business (con’t.)
business entityThe business exists independently of its owner’s personal holdings.
accounting period can cover:One monthThree months (quarterly)One Year (most common)
going concernAccountants assume that a business has the ability to survive and operate indefinitely.
business entityThe business exists independently of its owner’s personal holdings.
accounting period can cover:One monthThree months (quarterly)One Year (most common)
going concernAccountants assume that a business has the ability to survive and operate indefinitely.
Check Your UnderstandingCheck Your Understanding
Assignment:• Thinking Critically p35, 1&2• Computing in the Business
World• Problem 2-2 Complete in your
workbook.• A Matter of Ethics p34
Assignment:• Thinking Critically p35, 1&2• Computing in the Business
World• Problem 2-2 Complete in your
workbook.• A Matter of Ethics p34
Section 2 Accounting: The Universal Language of Business (con’t.)
Section 2 Accounting: The Universal Language of Business (con’t.)
