Principle Accounting

(Semester 1 - Entrepreneurship)

M Miqdad Robbani, M.Sc.

There are three types of
business

Merchandise
Manufacturing
Services

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 Types of Businesses
Manufacturing Business

Product
General Motors Cars, trucks, vans
Intel Computer chips
Boeing Jet aircraft
Nike Athletic shoes and apparel
Coca-Cola Beverages
Sony Stereos and television

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 Types of Businesses
Merchandising Business

Product
Produco
Wal-Mart duct
General merchandise
Toys “R” Us Toys
Circuit City Consumer electronics
Lands’ End Apparel
Amazon.com Internet books, music, video
retailer

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 Types of Businesses
Service Business
SeServrvicicee

Product
Prododuc
Disney ct
Entertainment
Delta Air Lines Transportation
Marriott Hotels Hospitality and lodging
Merrill Lynch Financial advice
Sprint Telecommunication

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There are three types of
business organizations

Proprietorship
Partnership
Corporation

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A proprietorship Advantages
is owned by one • Ease in organizing
individual. • Low cost of
organizing
Disadvantage
Joe’s • Limited source of
financial resources
• Unlimited liability

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 Advantages
A partnership is • More financial
owned by two or resources than a
more individuals. proprietorship.
• Additional
management skills.
Jihan and Salsa’s Disadvantage
• Unlimited liability.

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 A corporation is
organized under state Advantage
or federal statutes as a • The ability to obtain
separate legal entity. large amounts of
resources by issuing
stocks.
J & M, Inc. Disadvantage
• Double taxation.

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 Business Strategies

A business strategy is an integrated

set of plans and actions designed to
enable the business to gain an
advantage over its competitors, and
in doing so, to maximize its profits.

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 Business Strategies

Under a low-cost strategy, a business

designs and produces products or
services of acceptable quality at a cost
lower than that of its competitors.
Wal-Mart
Southwest Airlines

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 Business Strategies

Under a differential strategy, a business

designs and produces products or services
that possess unique attributes or
characteristics which customers are willing
to pay a premium price.
Maytag
Tommy Hilfiger

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 Value Chain of a Business
A value chain is the way a
business adds value for its
customers by processing inputs
into product or service.

Business Products or Customer

Inputs
Processes Services Value

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 Business Stakeholders

A business stakeholder is a person or

entity having an interest in the
economic performance of the
business.

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 The
TheTheProcess
PProroceceof
ssssooff
Providing
ProviiInformation
ddiningg
STAKEHOLDERS
Internal: External:
Identify Customers,
Owners,
1 stake-
holders.
managers, creditors,
government
employees

Assess
stakeholders’
2 informational
needs.
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 The
TheTheProcess
PProroceceof
ssssooff
Providing
ProviiInformation
ddiningg
Design the
Record accounting
economic Accounting
information
4 data about
business
Information
System
3 system to meet
stakeholders’
activities needs.
and events.

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 The Process of
Providing Information
STAKEHOLDERS
Internal: External:
Owners, Customers,
managers, creditors,
employees government
Prepare
accounting
5 reports for
stakeholders.
Accounting
Information
System
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 BBususineine
Business ssss
Ethics
1. Avoid small ethical lapses.
Sound
2. Focus on your long-term
Principles that reputation.
form the
3. You may expect to suffer
foundation for adverse personal
ethical consequences for holding
behavior to an ethical position.

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Profession of Accounting
Accountants employed by a business firm or
a not-for-profit organization are said to be
engaged in private accounting.

Accountants and their staff who provide

services on a fee basis are said to be
employed in public accounting.

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Profession of Accounting
Accountants employed by a business firm or
a not-for-profit organization are said to be
engaged in private accounting.

Accountants and their staff who provide

services on a fee basis are said to be
employed in public accounting.

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Generally Accepted Accounting Principles
GenerallyGenerally
(GAAP)

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 The Accounting Equation

Assets = Liabilities + Owner’s Equity

The resources The rights of the The rights of the

owned by a creditors, which owners
business represent debts
of the business

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 What is a business
transaction?

A business transaction is an economic event or condition

that directly changes an entity’s financial condition or
directly affects its results of operations.

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