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łNTRGDUCTiON TO ACCOUNT! NG

COURSE 1 - Wellcome to Accountiri& Area O

Accounttnfc is an informasion and measurement system ihal ideniifies, cecords and communicases celevanl in/oc mahoń aboui ihe actwiiies oj an organkaiion.

The primary objecliye oF accounling is lo proyide useFul inFormalion For making dcci s i on s. such as assessing opporlunilics. producls. invcslmcnls. social and com muniiy rcsponsibil ilies. Anolhcr imporlanl objecliye is relaled lo slev*ardship. Ihal is. accounling rcporls how managers (slcy^ards) haye uscd Ihc resources cnlruslcd lo Ihem by Iheowncrs.

To achieye ils objecliyes. accounling includes acliyilies such as: idenliFying, measuring, reporling and analyiing business cycnls and Iransaclions (ie.. CAchanges belv*een enlilies). Accounling also inyolycs inlcrpreling inFormalion and designing inFormalion syslcms lo proyidc uscFul reporls Ihal monitor and control an organization^ activities. The accounting department cłesigns a system ofintemal Controls for the organization^ use in order to promote cFFicicncy and preyeni ihc unauihori^cd usc oF ihc cornpan/s resources.

Aocounling proyides inFormalion only aboui Iransaclions and eyenls Ihal can be expresscd in monelary lerms. The conacquence is Ihal imporlanl inFormalion like Ihe capabililies oF Ihe managemenl leam or Ihe imminence oF a slrike. allhough essenlial. cannol be Iranslalcd inlo accounling language. Despile ils lim ils. accounling oFFcrs lo inlcreslcd parlics inFormalion Ihal is synlhelic and unique aboui an organisalion.

I. I. Business entfttes

A verybroad classification of orgamzations distinguishes the m as “for profif’ and “not-For-profit” In Ihc lfnilcd Slalcs Iwo Ihirds oF ihc acliyc y^orkForcc is inyoKcd in For-profil or business cnlcrpriscs. Business enlerprises may be: sole proprtetorshtps fsole Iradcr). partnershlps or compantes (corporAttons).

A sole proprtetorslltp is an unincorporaled business ov/ned by one person who is oFlcn ihe manager loo. This smali-siać business is nol legaliy separalcd From ils ovrner. and ils duralion expires v/hen Ihc ovrncr decides lo lerm inale il or dies.

A pArtnershtp inyolycs scyeral pcople joinlly owning and running a business. Somc oFlhosc enlilies arc large in siie (inlcrnalional accounling Firms, such as PriccWalerhouseCoopcrs. Ernsl&Young. KPMG. Deloille Touche Tohmalsu). A parlnership is nol legally separale From ils owners and each partner is resp^nsible for the debts of the business (unlimited liability). A partnership’s life expires by choicc or wi ihdrawal oFparincrs. Pariners’ shares cannot be sold without the agreement of other partners. When Ihis happens, a ncv^ parlnership is Formcd. In Ihe Anglo-Saxon world. parlnerships yrereerealed lo allow Iheproyision oFproFessional seryiccs by lay^ycrs, doclors. archilccls and aocounlanls. In Romania, ihc best equivalent for partners hips is “societate civila” which is mainly usedby lawyers.

A company (corporalion in Ihc Lfnilcd Slalcs) can cmcrgc v/ilh Ihc eonIribulion oF many indiyiduals. each bringing in a Fraclion oF Ihe capilal nccded lo opcralc Ihe business (shares oF capi lal are usually boughl and sold Frequcnlly). Thcse conlribulors are called shareholders, slockholdcrs or members (owners). Allhough Ihe shareholders ov*n Ihe company, il is oFlen Ihe case Ihal Ihey do nolparlicipale in

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