Business 10 Course 1.2 and 1.2 Accounting Notes

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1.1 What is Accounting?

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There are 5 Main activities involved
in accounting:
1. Gathering financial information
2. Preparing and collecting permanent records.
3. Rearranging, summarizing, and classifying
financial information
4. Preparing information reports and summaries
5. Establishing controls

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Accounting Helps Businesses
Answer Questions
 Is the business earning enough
profit?
 Are the selling prices of the
products high enough?
 What is the value of all the goods
for sale?
 Every business requires
good financial
information to make
good decisions.
 By enabling financial
information to be
gathered and prepared,
a good accounting
system provides the
answers to many
questions
 To whom was cheque No. 333
issued?
 How much did John Doe earn
last year?
 Are our customers paying their
bills on time?

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Accounting can also help Answer
Questions
Other persons, companies or organizations might seek answers to the
following questions:
 Should I lend money to this business?
 Should I buy into this business?
 Should I sell this business?
 Is the business well run?
 Is the company growing satisfactorily?
 Can the business afford to pay more to its employees?
 Is the business paying the proper amount of income tax?

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Accounting Term:
Accounting Records
 Accounting Records are orderly records of the financial
activities of a business.
 Bookkeepers and Accountants both work with Accounting
records.

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Compare
 involves the planning and
keeping of accounting records.
There may be some analyzing
and interpreting involved but
not to the extent of accounting.
 Bookkeeping is the
recording, posting , and
proving of the financial data.
Bookkeeping takes place
before accounting takes
place.
 is the planning, keeping,
analyzing and interpreting of
accounting records.
 Accounting is the
establishing and maintaining
of the entire accounting
system, the interpreting of
the results of the recorded
data, and the assisting in the
management or decision-
making aspects of the
organization.
Bookkeeping Accounting

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The Accounting Clerk (Bookkeeper)
The work of an accounting clerk is clerical in nature
and mostly concerned with routine matters.
 ensures that transactions are properly recorded with
supporting documents
 records the accounting entries in the books of account and
balances the ledger
 makes payroll calculations, payroll cheques and other
payroll records
 carries out all necessary banking transactions

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The Accountant
The work of an accountant is broader is scope and
requires more education and experience.
 develops a system to ensure that correct data are entered into the
accounting system
 ensures that generally accepted accounting standards are met
 interprets data produced by the accounting system
 prepares reports based on data
 participates in management meetings
 supervises the work of all accounting employees

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Bookkeeper or Accountant
Who does the following types of work?
 Ensuring that transactions are properly
recorded and supporting documents are present
and correct.
 Carrying out necessary banking transactions.
 Developing a system to ensure correct data are
entered into an accounting system.
 Recording the accounting entries and balancing
the ledger
 Interpreting data produced by the accounting
system.
 Participating in management meetings are
assisting in making business decisions.
Bookkeeper
Bookkeeper
Accountant
Bookkeeper
Accountant
Accountant

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Accounting is the Language of Business

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Why Study Accounting?

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Personal Benefits
 Budgeting
 Investments
 Keeping track of financial records – ex. Bank Account
 Income Taxes
 Payroll deductions
 Mortgages and Loans
How can an understanding of accounting be beneficial
to a persons daily life

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Career Benefits
 Daily Banking
 Amounts owed by customers
 Producing Income Statements
 Preparing Payroll
How could an understanding of Accounting be
beneficial in many different careers?

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Business Careers
 VERY!
 Business and Entrepreneurialism is growing
 Every business must account for its financial activities
 Financial activities determine whether the business grows or
even whether the business even continues.
 Accounting information is critical.
 Inaccurate accounting records could easily contribute to
business failures and a lot of unnecessary stress!
How important is an understanding of Accounting to
any Business?

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Accounting as a Profession
Canada has 3 national professional accounting organizations
 Chartered Accountant (CA)
 Certified General Accountant (CGA)
 Certified Management Accountant (CMA).
Each profession requires you to complete a prescribed course
usually after you have completed a university degree.
Note: As of January 2013, CA’s and CMA’s have integrated into
one professional group – Chartered Professional Accountants
Canada. CGA’s are joining this group this year.

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Working Accountants
1. Public accountant
 serves the general public for a fee, much like a doctor or
lawyer does.
 The main type of work done by public accountants is
auditing.
 Auditing is the examination and testing of the books,
records, and procedures of a business in order to be able
to express an opinion about its financial statements.
Two working categories:

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Working Accountants
2. Professional accountant
 may choose industrial or institutional accounting
 Industrial accountants work for large companies such as
Ford or Microsoft.
 Institutional accountants work for the government, banks,
large insurance companies and similar organizations.
Two working categories:

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Assignment.
 See Blackboard for Details.