ACC100 Introduction to Accounting

ACC100

Chapter 1 – Introduction to Accounting

Week 1 Notes

What is a business?

• “The activity of making or buying or selling goods or providing services in exchange for money”

What are goods?

• g. Nike shoes or BMW (physical items/tangible products)

What are Services?

• g. Netflix or yoga class or music concert
• Some companies sell BOTH goods and services
• g. Rogers/Bell – you can buy an iPhone (=goods) and a data plan (=service)

3 Business Sectors:

• Primary = grows/gathers raw materials from natural resources
• g. mining, fishing, farming
• Secondary = turns raw materials into products
• g. breweries, car manufacturers, clothing makers
• Tertiary = provide services to the general population/other businesses
• g. Canadian Tires, McDonalds, Uber

Who cares about a business and why?

• Stake Holders = individuals/groups who have objectives – they want something from their relationship with a business
• g. a customer wants to buy a good product from a business
• Stakeholders can be internal (they work for the company) or external (they are outside the business)
• g. the CEO of Coca Cola is an internal stakeholder who wants to keep his/her job and see the company successful and the bank is an external stakeholder who wants the company to repay loans
• Stakeholders make decisions to help them meet their objectives

Accounting system = information system that collects, tracks, and communicates business transactions with stakeholders use to make decisions to meet their objectives.

What are transactions?

• In simple terms… STUFF that happens in a business. E.g. You sell a BMW… you get $$$...pay your employees…you need to record these things, so you know they happened and at what $$$.
• Everything that you record has 2 aspects to it: something you give and something you get. Give BMW. Get $$$.

Stakeholders want financial info (about transactions) to be good, up-to-date, truthful, easy to understand… We call these qualities that stakeholders want financial information to have “the qualitative characteristics”

• The 6 qualities are: faithful (info is truthful!), relevant (info is useful for decision making), comparable (can compare to other businesses or the same business over time), verifiable (other people would determine the same $ amounts), timely (info is provided quickly) and understandable (info is clear/concise)