acct120 class #2 forms of organizations, internal and external users in accounting

Introduction Introduction toto

Accounting Accounting 120120

Mr. Binet / Moncton High School

Class #2: Forms of Organizations, Internal and External Users in Accounting

1. Take 10-15 minutes to finish the PowerPoint assignment from last class.

2. Presentation on Forms of Organizations and Internal and External Users in Accounting

3. Quick-Check Questions

In Today’s Class…In Today’s Class…

1. The Service Business: Sells a service to the public; it does not make or sell a product as its main activity.

2. The Merchandising Business: buys goods and resells them at a higher price for profit.

3. The Manufacturing Business: Buys raw materials, converts them into a new product, and sells these products to earn a profit.

4. The Non-Profit Organization: May carry on activities to meet social needs and not for a financial profit.

Types of Types of BusinessesBusinesses

1. In groups of two, Create a PowerPoint or MS Word file:

Title slide/page with both names on it and pertinent class info.

Give real-world examples of the 4 Types of Businesses (1 per slide + photo/logo/clipart).

Find out information on the 3 different types of Accounting Certification (CA, CMA, CGA) and display their logo, website addresses and a short summary of what they do and how one may get this accreditation.

Yesterday’s Yesterday’s AssignmentAssignment

1. A sole proprietorship, or single proprietorship, is a business owned by one person. No legal requirements must be met in order to start this form of business, other than to file for a business license and register a business name.

2. A partnership is owned by two or more persons called partners. Like a proprietorship, no special legal requirements must be met in order to start a partnership, other than to register the business name and obtain a business license.

3. A corporation is a business that is a separate legal entity chartered (or incorporated) under provincial and federal laws. A corporation is responsible for its own acts and its own debts.

4. Non-Business Organizations: Is not for profit, no specific owner (usually a board of directors).

Forms of Forms of OrganizationsOrganizations

One Owner Separate entity for

accounting purposes Not a separate legal

entity from the owner Unlimited liability Limited life Owner taxed on

profits

Sole Proprietorship

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

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

Not-for-profit and government organizations

No identifiable owner

Examples: schools, charities, libraries, hospitals, police, shelters

Corporations

For each of the following independent situations, identify which type of business organization is being described Sole Proprietorship, Partnership or Corporation

The owners of JenStar can sell or transfer their ownership to another person without affecting the operation of the business.

The 28 owners of InterIsland Tours each have 15,000 shares. Jan Wallace and Roth Winters are subject to unlimited liability

in their business. Willis Corsaires is responsible for debts that are greater than

the resources of his business. The profits of Perth’s Financial Consulting are reported and

taxed on the personal tax return of Wyette Perth, the owner.

Check for Understanding

1. What are the three common forms of business organization?

2. Identify examples of non-business organizations.

3. What is the major objective of accounting?

4. Distinguish between accounting and recordkeeping.

Check for Understanding

Take a few minutes to answer the following questions – save them in a Word file and copy/paste them into an email to me.

For each of the following independent situations, identify which type of business organization is being described Sole Proprietorship, Partnership or Corporation

1. The owners of JenStar can sell or transfer their ownership to another person without affecting the operation of the business.

2. The 28 owners of InterIsland Tours each have 15,000 shares.3. Jan Wallace and Roth Winters are subject to unlimited liability

in their business.4. Willis Corsaires is responsible for debts that are greater than

the resources of his business.5. The profits of Perth’s Financial Consulting are reported and

taxed on the personal tax return of Wyette Perth, the owner.

Check for Understanding

External users of accounting information are not directly involved in running the organization. They include shareholders, lenders, directors, customers, suppliers, regulators, lawyers, brokers and the press.

Financial accounting is the area of accounting aimed at serving external users. Its primary objective is to provide external reports called financial statements to help users analyze an organization’s activities.

Users of Accounting InfoUsers of Accounting Info

Can the company repay current loans?

Is the purchaser able to pay for goods purchased?

Do revenues include only those for the current period?

Have all expenses been recorded? Is net income large enough to

support a request for increased pay?

Questions Asked by External UsersQuestions Asked by External Users

Internal users of accounting information are those individuals directly involved in managing and operating an organization. The internal role of accounting is to provide information to help internal users improve the efficiency and effectiveness of an organization to delivering products and services.

Managerial accounting is the area of accounting aimed at serving the decision-making needs of internal users. Managerial accounting provides special-purpose reports customized to meet the information needs of internal users. An example of such a report is a listing of credit customers who are late in paying their accounts.

Users of Accounting InfoUsers of Accounting Info

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?

Questions Asked by Internal UsersQuestions Asked by Internal Users

Internal Owners, Managers

External Bankers and other

creditors, investors and potential investors, unions, external auditors, Canada Revenue Agency

Users of Accounting InfoUsers of Accounting Info

Internal Operating FunctionsInternal Operating Functions

Research and Development

Purchasing

Human Resources

Production

Distribution

Marketing

Servicing

Accounting Services

Next week we will look at the Ethics of Accounting and learn a little more about the infamous Enron scandal.

We will complete chapter 1 and begin to play with ledgers.

Next Week!Next Week!