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Section 2 Accounting: The Universal Language of Business

Chapter 2. Section 2 Accounting: The Universal Language of Business. $. $. 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.

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Section 2 Accounting: The Universal Language of Business

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  1. Chapter 2 Section 2 Accounting: The Universal Language of Business $ $ • 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. $ $

  2. Section 2 Accounting: The Universal Language of Business(cont'd.) Chapter 2 $ Why It’s Important Understanding accounting systems is the key to understanding business. $ • Key Terms • accounting system • manual accounting system • computerized accounting system • GAAP • financial reports • financial accounting • management accounting • business entity • accounting period • going concern $ $

  3. Section 2 Accounting: The Universal Language of Business(cont'd.) Chapter 2 $ The Accounting System Designed to collect, document, and report on financial transactions affecting the business. $ • manual accounting system • computerized accounting system • generally accepted accounting principles (GAAP) • financial reports $ $

  4. Section 2 Accounting: The Universal Language of Business(cont'd.) Chapter 2 $ How the Accounting System Works Outputs Financial and Management Accounting Reports $ Inputs Source Documents Processing Tasks • Checks • Invoices • Sales Slips • Receipts $ • Analyzing • Classifying • Recording • Financial condition • Results of operations • Investments by and distributions to owners $

  5. Section 2 Accounting: The Universal Language of Business(cont'd.) Chapter 2 Chapter 2 $ Using Accounting Reports for Making Business Decisions There are two groups that use accounting reports: $ • individuals outside the business who have an interest in the business • individuals inside the business $ $

  6. Section 2 Accounting: The Universal Language of Business(cont'd.) Chapter 2 Chapter 2 $ Financial Accounting Financial accounting focuses on reporting information to external users. $ Who Uses Financial Accounting Reports? $ • potential investors • individuals and institutions, such as banks, that loan money to a business • local, state, and federal governments • workers, consumers, union leaders, and competitors $

  7. Section 2 Accounting: The Universal Language of Business(cont'd.) Chapter 2 Chapter 2 $ Management Accounting Management accounting focuses on reporting information to management. $ $ • Managers $

  8. Section 2 Accounting: The Universal Language of Business(cont'd.) Chapter 2 Chapter 2 $ Accounting Assumptions $ • business entity • accounting period • going concern $ $

  9. Section 2 Accounting: The Universal Language of Business(cont'd.) Chapter 2 Chapter 2 $ Check Your Understanding Consider creating an “accounting system” for your personal finances. $ 1.How would you organize the system? 2.What inputs would there be? 3.How might you record your activities? 4.How might you report on those activities? $ $

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