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ACCOUNTING (3 ACTIVITIES (Records, Communicates, Identifies), FORMS OF…
ACCOUNTING
3 ACTIVITIES
Records
Communicates
Identifies
USERS
Internal users
production supervisors
finance directors
marketing managers
company officers
Managerial accounting
External users
Financial accounting
Investors (owners)
Creditors (suppliers and bankers)
MEASUREMENT PRINCIPLES
Cost principle
record assets at their cost
Fair value principle
report at fair value
FORMS OF BUSINESS OWNERSHIP
Partnership
≥ 2 persons
unlimited personal liability
retail and service-type business
Partnership agreement
Corporation
Legal entity under law
Limited liability
Ownership divided into shares
Proprietorship
1 person
Small service-type business
receives profits, suffer losses
ASSUMPTIONS
monetary unit
Record data in
MONEY TERMS
economic entity
entity's activities
SEPARATE
from owners
Basic Accounting Equation
A = L + E
Assets
Liabilities
Equity