Thursday, March 25, 2010

The Nature of Accounting

Accounting is the process of recording, summarizing, analyzing, and interpreting financial (money-related) activities to permit individuals and organizations to make informed judgments and decisions. By law all businesses must keep accounting records. Decisions are based on accounting information for profit and non-profit companies alike. There are different forms of business organizations:

Private business
object is to earn a profit

Sole Proprietorship
owned by one person

Partnership

co-owned by two or more persons

Corporation
owned by investors called stockholders (The business—not the owners—are responsible for the company’s obligations.) There are different types of business organizations:

Service business

doctors, lawyers, barber shop, etc. 

Merchandising business
purchases goods for resale 

Manufacturing business
produces a product to sell 

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