Introduction to Accounting and Business

This Chapter serves as a very basic introduction to both business and accounting. Three types of businesses are identified, i.e., manufacturing (inputs become products and sold to individual customers), merchandising (usually finished products are purchased from vendors and sold to customers), and service (services such as tax preparations are sold as opposed to products). The three types of business organization are also discussed, i.e., proprietorship, partnership, and corporation.

A proprietorship is a form of business owned by a single person. A partnership is when two or more people join together to take ownership of a company. A corporation is a legal entity and it is separate from those who invest in it and those who manage and make decisions for the company.

Business stakeholders are those persons or entities that have an interest in the economic performance of the business. This would include owners, managers, employees, customers, creditors, and government. The reason for the interest in the economic performance of the business varies widely. The owner is interested in profits, employees want the company to continue to be a going concern to retain employment, and the government has an interest in taxes and employment.

Business ethics are discussed and are important. Whether it in business or personal life ethics put that stamp on us of who we are and what we represent. Immediate lapses in ethical judgment can have long term and detrimental effects on the organization.

This chapter addresses the basic accounting equation of Assets = Liabilities plus Owner’s Equity. In the form of a simple introduction to the accounting equation the concepts of debits and credits are not addressed. Rather, the ideas of increases and decreases are addressed.

After the series of increase and decreases are posted this chapter shows how this financial information is entered into financial statements. The financial statements discussed are the income statement, statement of owner’s equity, balance sheet, and the statement of cash flows.