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Successful Business Decisions - Accountant's Role

Explore the decisions that an accountant can help a successful business make, using the example of a chocolate bar company. Learn about the characteristics of a free enterprise system and the traits of successful entrepreneurs.

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Successful Business Decisions - Accountant's Role

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  1. Do Now • Pick a business you consider successful. List 3 reasons why you consider it a successful business.

  2. Discussion Name your favorite products. • Discuss what decisions an accountant could help them to make. • EX: Chocolate bar – Hershey • Where to buy the beans • Where to manufacture the candy • Should they own the plant where the candy is wrapped • Should they buy the trucks to ship. Etc. • Should they use machines or people • How much advertising can we afford?

  3. Before we begin…. • What is the major characteristic of a free enterprise system? • What are some traits of successful entrepreneurs? • What are different types of businesses that operate to earn a profit? • What type of business does things for its customers and charges them a fee? the right of individuals to make their own choices in the purchase of goods and in the selling of their products Risk-takers, self-starters, assertive and creative, have excellent time management and problem solving skills service, merchandising and manufacturing a service business

  4. The accounting system produces information used by businesses to make decisions. Examples: • Purchasing • Hiring • Production • Payments • Sales • Collections

  5. The Environment of Business Exploring the Worldof Business Section 2.1 free enterprise system People are free to produce the goods and services they choose. Individuals are free to use their money as they wish. Business owners compete to attract the customers they need to continue operating. Free Enterprise System Profit Loss loss When a business spends more money than it earns. profit The amount of money earned over and above the amount spent to keep the business operating.

  6. The Environment of Business Exploring the Worldof Business Section 2.1 Operate at a profit What a business needs to survive An individual willing to take the risk

  7. The Environment of Business The fanny pack sandal Exploring the Worldof Business Section 2.1 Inventors entrepreneur A person who transforms ideas for products or services into real-world businesses. Investors Entrepreneurs Roles ina Business Managers Employees

  8. The Environment of Business Exploring the Worldof Business Section 2.1

  9. The Environment of Business Exploring the Worldof Business Section 2.1 Self-Starters OrganizationalSkills Traits of Entrepreneurs AccountingSkills MarketingKnowledge

  10. Types and Forms of Businesses Exploring the Worldof Business Section 2.1 Three Types of Business Operations Service Business Merchandising Business Manufacturing Business manufacturing business A business that buys raw materials, uses labor and machinery to transform them into finished products, and sells the finished products to individuals or other businesses. merchandising business A business that buys finished products and resells them to individuals or other businesses. service business A business that provides a needed service for a fee.

  11. Types and Forms of Businesses Exploring the Worldof Business Section 2.1 $ All types of businesses need capital to begin. capital Money that investors, banks, or business owners supply for a business to begin.

  12. Types and Forms of Businesses Exploring the Worldof Business Section 2.1 Three Types of Business Organization SoleProprietorship Partnership Corporation sole proprietorship A business owned by one person. partnership A business owned by two or more persons. corporation A business recognized by law to have a life of its own.

  13. Types and Forms of Businesses Exploring the Worldof Business Section 2.1 • Easiest form of business to start • Little to no legal paperwork is required

  14. Types and Forms of Businesses Exploring the Worldof Business Section 2.1 • Partners enter into a written, legal agreement to specify each partner’s investment, responsibilities and percent of profit/losses they are entitled to

  15. Types and Forms of Businesses Exploring the Worldof Business Section 2.1 A corporation must obtain a charter. • Recognized by law to have a life of its own. charter Legal permission to operate. Spells out rules of operation. Before the charter, the company existed as a partnership, sole proprietorship, or similar structure.

  16. Activity #1 Indicate whether each of the following businesses is a service business, a merchandising business, or a manufacturing business • International Business Machines (IBM) • Gap • Glendale Memorial Hospital • Avis Rent A Car System • Ford Motor Company • Bank of America • Ace Hardware Stores • Michigan City Animal Hospital • Office Depot • Wal-Mart Stores • Allstate Insurance • U.S. Steel

  17. Accounting: The Universal Language of Business Section 2.2 Key Terms • accounting system • manual accounting system • computerized accounting system • GAAP • financial reports • financial accounting • management accounting • business entity • accounting period • going concern

  18. Discussion • What would happen if everyone used a different set of rules when: • Driving • Obeying the law • Graduating high school….

  19. The Accounting System Accounting: The Universal Language of Business Section 2.2 Manual AccountingSystem Two types of accounting systems Computerized Accounting System accounting system Designed to collect, document, and report on financial transactions affecting the business. manual accounting system When accounting information is processed by hand. computerized accounting system When accounting information is processed by recording it into a computer. https://www.youtube.com/user/Quickbooks https://www.youtube.com/watch?time_continue=17&v=vNdZmf_nLZs

  20. The Accounting System Accounting: The Universal Language of Business Section 2.2 What Is GAAP? GAAP (generally accepted accounting principles) The set of rules that all accountants use to prepare financial reports. (All businesses follow GAAP).

  21. The Accounting System Accounting: The Universal Language of Business Section 2.2 What Are financial reports? financial reports Documents that present summarized information about the financial status of a business.

  22. Using Accounting Reports for Making Business Decisions Accounting: The Universal Language of Business Section 2.2 Individuals outside the business who have an interest in the business Two groups that useaccounting reports Individuals inside the business

  23. Using Accounting Reports for Making Business Decisions Accounting: The Universal Language of Business Section 2.2 Those interested in the financial accounting reports of a business include: Local, state, and federal government Employees, consumers, and competitors Investors financial accounting The type of accounting that focuses on reporting information to external users.

  24. Using Accounting Reports for Making Business Decisions Accounting: The Universal Language of Business Section 2.2 • Purchasing decisions • Hiring decisions • Production decisions • Payments • Sales • Collections Management accounting reports are prepared for managers involved in: management accounting The type of accounting that focuses on reporting information to management; often referred to as accounting for internal users of accounting information.

  25. Accounting Assumptions Accounting: The Universal Language of Business Section 2.2 GAAP Assumptions business entity The accounting assumption that a business exists independently of its owner’s personal holdings. The accounting records and reports are maintained separately and contain financial information related only to the business. Business entity Accounting period Going concern

  26. Accounting Assumptions Accounting: The Universal Language of Business Section 2.2 GAAP Assumptions accounting period The period of time covered by an accounting report. Business entity Accounting period going concern The accounting assumption that a business is expected to operate indefinitely. Going concern

  27. Calculate the total receipts. $650.00 + $500.00 = $1,150 Step 1 Calculate the total expenditures. $75.98 + $477.50 + $380.00 + $123.76 = $1,057.24 Step 2 Calculate the net profit (loss). $1,150.00 - $1,057.24 = $92.76 profit (Receipts exceed expenditures) Step 3 Question 1 DePalm Pizza had the following cash transactions yesterday. Receipts (money in): Checks: $650.00, Cash $500.00 Expenditures (money out): Gas and oil for delivery vehicle $75.98, supplies $477.50, salaries $380.00, and miscellaneous expenditures $123.76. Did DePalm have a “profit” or “loss” for the day?

  28. Question 2 Sole proprietorship is the most popular form of business ownership, yet very few large businesses are sole proprietorships. Give at least two reasons to explain this. • Sole proprietorships have the expertise of only the owner to call on. For example, the owner may be a great accountant but only a fair salesperson. • The business has the promise of only one owner to use to try to secure money from investors or lenders. • The owner bears all of the risk of loss, or unlimited liability. The owner could lose personal equity if the business fails. • The most talented potential employees would tend to prefer the job security of working in larger firms.

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