Accounting is a system of
dealing with financial
information that provides
information for decision-
making.
G.E. Syme & T.W. Ireland
What is Accounting?
Accounting is the
language of business.
Art Lightstone
The Five functions of
Accounting
1. Gathering financial
information.
The Five functions of
Accounting
2. Preparing and
collecting permanent
records.
The Five functions of
Accounting
3. Rearranging,
summarizing and
classifying financial
information.
The Five functions of
Accounting
4. Preparing
information reports
and summaries.
The Five functions of
Accounting
5. Establishing
controls to promote
accuracy and honesty
among employees.
Types of Business
All businesses fall into three general
categories…
Sells effort (ie. work, talent) that does not
1. service result in a material item. A haircut would be
an example of a service. A service is often
viewed as an expense by the buyer.
Advantages
• ease of formation
• broader management skills
• limited regulations
• more capital resources
Partnership
Disadvantages
• unlimited liability
• possible disagreements
• divided authority
• difficult to find partners
• partners liable for each other
Corporation
Advantages
•limited liability of shareholders (However,
directors and officers can be liable in
certain circumstances.)
•possible lower taxation rate
•can sue / be sued in the corporate name
•more prestige
•continuity of business
Corporation
Disadvantages
•higher start-up costs and greater
formalities
2. Journalizing
8. Post-closing
Trial Balance
3. Posting
7. Closing A = L + OE
Entries
4. Trial Balance
6. Financial
Statements
5. Worksheet