Chapter 1

• Introduction to Accounting:

  • Trading business buys goods from suppliers and sells to customers.
  • Service business provides services to customers.
  • Forms of business ownership: Sole proprietorship, Limited liability partnership (LLP), Private limited company (PLC)
• Features of Sole proprietorship, LLP, and PLC:

  • Capital structure and ownership
  • Access to funds
  • Extent of liability and risk
  • Management of business
  • Lifespan
  • Transfer of ownership
  • Formalities and procedures
• Stakeholders and their decision-making needs:

  • Owners and shareholders, managers, employees, lenders, suppliers, customers, government, competitors
• Table 1.2: Stakeholders' interactions with business and decision needs:

  • Owners and shareholders contribute capital and expect profit distribution
  • Managers devise strategic plans
  • Employees perform duties
  • Lenders make money available and expect repayment with interest
  • Suppliers supply goods/services and decide on credit
  • Customers buy goods/services
  • Government enforces tax regulations
  • Competitors sell similar goods/services
• Stakeholders rely on accounting and non-accounting information for decision-making
• Role of accounting:

  • Provides information for stakeholders to make informed decisions
  • Role of accountants: prepare and provide accounting information for decision-making
• Accountants must:

  • Adapt, solve problems, provide timely, relevant, and credible information
  • Uphold professional ethics: integrity and objectivity
• Unethical actions by accountants can mislead stakeholders into making poor decisions
• Accounting theories ensure accounting information presents a true and fair view of business activities