1. Accounting: The Key to Success
C H A P T E R 1
1-1

2. • Accounting is a process that involves
collecting information, recording it, and then
reporting it to various decision makers.
• It’s objective is to help people make better
decisions.
What is Accounting?
1-2 LO 1

3. • Sole Proprietorship
• Partnership
• Corporation
Forms of Organization
1-3 LO 2

4. • One owner
• Separate entity for accounting purposes
• Not a separate legal entity from the
owner
• Unlimited liability
• Limited life
• Owner taxed on profits
Sole Proprietorships
1-4 LO 2

5. • Two or more owners
• Separate entity for accounting purposes
• Not a separate legal entity from the
owners
• Unlimited liability
• Limited life
• Owners taxed on profits
Partnerships
1-5 LO 2

6. • One or more owners
• Separate entity for accounting purposes
• Separate legal entity from the owner(s)
• Limited liability
• Unlimited life
• Corporation taxed on profits
Corporations
1-6 LO 2

7. • Not-for-profit and government
organizations
• No identifiable owner
• Examples: schools, charities, libraries,
hospitals, police, shelters
Non-Business Organizations
1-7 LO 2

8. • Accounting is a service activity that
provides information to help internal and
external users make decisions.
Users of Accounting Information
1-8 LO 3

9. Examples of External Users and
Some of Their Decisions
1-9
User Group Decisions to be made
Lenders To lend money or not.
Shareholders To invest or not.
External auditors To determine the reasonableness
of theclient’s statements.
Unions To determine if wages are fair.
CRA To determine if payroll deductions
are calculated properly.
LO 3

10. • Reports for external users are usually in the form
of financial statements.
• The information in the statements needs to be
relevant, reliable, and comparable.
• Generally accepted accounting principles
(GAAP)are important in making the statements
useful to users.
• Canadian GAAP are undergoing significant
changes because of the adoption of International
Financial Reporting Standards(IFRS).
External Reporting
1-10

11. • Internal users are involved in managing
and operating an organization.
• Accounting provides information to these
users to help them improve the efficiency
and effectiveness of the organization.
Internal users
1-11 LO 3

12. • What are the manufacturing expenses per
unit of product?
• What is the most profitable mix of services?
• How much do we have to sell to break even?
• How much profit did we earn last month?
• Are we keeping our expenses under control?
Typical Questions Asked by
Internal Users
1-12 LO 3

13. • Ethics are beliefs that differentiate right
from wrong.
• Ethics and ethical behaviour are important
to the accounting profession and to those
who use accounting information.
• Ethical practices build trust, which
promotes loyalty and long-term
relationships with customers, suppliers,
employees, and investors.
Ethics and Ethical Behaviour
1-13 LO 4

14. • One of the primary goals of accounting is
to provide useful information for decision
making.
• In order for the information to be useful, it
must be trusted.
• Accountants must act in an ethical manner
in order for the information they produce to
be trusted.
Ethics in Accounting
1-14 LO 4

15. • Maintain a high level of professional
competence.
• Treat sensitive information as confidential.
• Exercise due care and professional
judgement.
• Must not be associated with deceptive
information.
Ethical Obligations of
Accountants
1-15 LO 4

16. Broad fields of accounting include:
• Financial accounting
• Managerial accounting
• Taxation
• Accounting-related fields
Accounting Opportunities
1-16 LO 5

17. Accountants may work as:
• Private accountants
• Public accountants
• Government accountants
Accounting Opportunities
1-17 LO 5

18. Professional certifications in Canada:
• Certified General Accountant (CGA)
• Certified Management Accountant (CMA)
• Chartered Accountant (CA)
• Unification process of the orders -
http://cpacanada.ca/; http://cpa-
quebec.com/home.
Professional Certification
1-18 LO 5