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Lesson 1: Introduction to Accounting and Business

Introduction

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This course introduces you to the discipline of accounting through an introduction to two of its subdisciplines: financial and managerial accounting. Lessons 1 through 9 cover material in financial accounting. In financial accounting, we generate reports and communicate the information to decision-makers external to the company so that they can evaluate the company. Lessons 10 through 15 cover material in managerial accounting. In managerial accounting, we provide information to internal decision-makers.

Accounting’s role in the decision-making process is key to the course.

We all use basic accounting concepts in our daily lives.Individuals have many of the same transactions that businesses do: we earn money, pay bills, buy assets (such as cars and houses), borrow money, and so on. Businesses record these transactions in their accounting systems and generate reports (financial statements) that summarize the results of operations for a period of time, like a month or year. Businesses are required to follow a set of rules and regulations (generally accepted accounting principles) when they record their transactions and prepare financial statements.

Lesson 1 introduces you to the various concepts and vocabulary necessary for a basic understanding of accounting. The first part of the lesson defines terms that you must know in order to understand the content in the rest of the lessons in the course. The latter part of this lesson focuses on business transactions and their effect on the basic accounting equation, which serves as the foundation for accounting.

Learning Objectives

After completing this lesson, you should be able to do the following things:

  • state the accounting equation and define each element of the equation;
  • demonstrate how business transactions are recorded in terms of changes in the elements of the accounting equation;
  • distinguish among different types of organizations: sole proprietorships, partnerships, corporations, limited liability companies (LLC), and limited liability partnerships (LLP); and
  • describe the four financial statements of a corporation and explain how they are interrelated.

Lesson Readings & Activities

By the end of this lesson, make sure you have completed the readings and activities found in the Lesson 1 Course Schedule.


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