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Financial Accounting Libby Chapter 1 Notes

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Lesson 1: The Accounting Process
(Textbook Libby et al. Chapters 1 and 2).
Objectives:
When you have successfully completed this lesson, you will be able to...
Define accounting and explain its purpose
Define business and identify the different types of businesses
Explain the accounting equation: Assets = Liabilities + Owner's Equity
Visualize the start of a business, create accounting transactions for it, and prepare simple financial statements Reading Assignment
Please read chapters 1 and 2 of your textbook.
Recommended Problem Assignment
Chapter 1. Please complete MC questions plus Exercises 1-1, 1-3, 1-7, 1-8, 1-9 and 1-11
Chapter 2. Please complete MC questions plus Exercises 2-5, 2-7, 2-9, 2-12 and 2-13 …show more content…

A group of owners may form a partnership. Some of the large CPA firms, doing over a billion dollars of business, were partnerships for many years. Recently these firms have become professional associations in order to limit the individual liability of the partners. However, being a partnership for tax purposes can have some real advantages, and many businesses continue to keep that form.
Most businesses eventually become corporations. Corporations can start or remain small but often they become huge, owned by many stockholders and are clearly the largest and most powerful business form. Some corporations are larger than most countries. Wal-Mart and Exxon/Mobil have revenues of over $300 billion, which would rank them with the top ten largest countries in the world. Almost all of the examples in the textbook are of corporations.
Types of Businesses
Businesses can provide many different types of services and activities. Here are some examples.
Manufacturing Companies: A manufacturing firm transforms basic resources into finished goods. These companies add value by taking simple inputs, such as labor and materials, and combining them to create a complex product like an automobile. Success is measured by the ability of the manufacturer to sell the complex product for more than the cost of the inputs. Examples are Boeing, Caterpillar, and Ford.
Merchandising Companies: A merchandising firm moves the product from

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