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1Accounting is the systematic and comprehensive recording of financial transactions pertaining to a business.

Accounting also
refers to the process of summarizing, analyzing and reporting these transactions. The financial statements that summarize a large
company's operations, financial position and cash flows over a particular period are a concise summary of hundreds of thousands of
financial transactions it may have entered into over this period. Accounting is one of the key functions for almost any business; it may
be handled by a bookkeeper and accountant at small firms or by sizable finance departments with dozens of employees at larger
companies.
2Accounting is the identification, measurement and communication of financial information about economic entities to interested
persons (Kieso and Weygandt)
- Arose from the need to communicate financial information
- Not derived from first principles
- Financial Accounting Standards Board (FASB) is authoritative rule making body
Underlying Assumptions
Key Assumptions - Accounting entity
- Double entry
- Timing-matching principal
- Accrual accounting
- Historical cost
3The role of accounting in business is to help interested parties (internal and external) to make business decisions.
Running a small business often requires owners to have experience in various business functions. Producing goods or services,
conducting economic forecasts, creating marketing strategies, and accounting for financial information are just a few responsibilities
of a small business owner. Above all, accounting plays an important role in small business management, helping track financial
information for business functions.
Accounting information allows business owners to assess the efficiency and effectiveness of their business operations. Prepared
financial statements can be compared to industry standards or to a leading competitor to determine how the small business is doing.
Business owners may also use historical financial accounting statements to create trends for analyzing and forecasting future sales.

4The history of accounting or accountancy is thousands of years old and can be traced to ancient civilizations.[1][2][3]

The early development of accounting dates back to ancient Mesopotamia, and is closely related to developments
in writing, countingand money[1][4][5] and early auditing systems by the ancient Egyptians and Babylonians.[2] By the time of the
Emperor Augustus, theRoman government had access to detailed financial information.[6]
It is believed that the very origins of writing itself may have developed out of early marks used to keep account of goods at ancient
warehouses more than 5,300 years ago. The notion that pre-numerical counting systems pre-dated even written language, didnt
come as a surprise to many historians and archeologists who have long since recognized that the history of human civilization is
largely indistinguishable from the history of commerce.

1A business, also known as an enterprise, agency or a firm, is an entity involved in the provision
of goods and/or services toconsumers.[1] Businesses are prevalent in capitalist economies, where most of them are privately
owned and provide goods and services to customers in exchange for other goods, services, or money. Businesses may also be
social non-profit enterprises orstate-owned public enterprises targeted for specific social and economic objectives. A business

owned by multiple individuals may be formed as an incorporated company or jointly organised as a partnership. Countries have
different laws that may ascribe different rights to the various business entities.

Business can refer to a particular organization or to an entire market sector, e.g. "the music business". Compound forms such
asagribusiness represent subsets of the word's broader meaning, which encompasses all activity by suppliers of goods and
services. The goal is for sales to be more than expenditures resulting in a profit.
2A business can be organized in one of several ways, and the form its owners choose will affect the company's and owners' legal
liability and income tax treatment. Here are the most common options and their major defining characteristics.
Sole Proprietorship
The default option is to be a sole proprietor. With this option there are fewer forms to file than with other business organizations. The
business is structured in such a manner that legal documents are not required to determine how profit-sharing from business
operations will be allocated
LLC
An LLC is a limited liability company. This business structure protects the owner's personal assets from financial liability and
provides some protection against personal liability. There are situations where an LLC owner can still be held personally responsible,
such as if he intentionally does something fraudulent, reckless or illegal, or if she fails to adequately separate the activities of the
LLC from her personal affairs

General Partnerships, Limited Partnerships (LP) and Limited Liability Partnerships (LLP)
A partnership is a structure appropriate to use if you are not going to be the sole owner of your new business.

In a general partnership, all partners are personally liable for business debts, any partner can be held totally responsible for the
business and any partner can make decisions that affect the whole business.

21. Sole proprietorTypical sole traders include the man-in-a-van type of occupation such as a plumber or electrician. However, the
term can also apply to people who run small, web-based businesses from home.
This is the simplest and the most common type of business out there. The sole proprietor is responsible for everything the business
does. You trade under your own name, with no separation of assets and liabilities. This means that youll be held personally liable for
any debts that the business incurs.

2. PartnershipPartnerships are typically found in professional services such as accountants, lawyers, doctors, dentists etc, where
the partners can share expertise and skills. They can also share the workload, organising work rotas to allow for time off and
holidays. Partnerships comprise two or more people and any profits, debts and decisions related to the business are shared.

3. CompanyCompanies are owned by shareholders who each put an amount of money into a central pool. This pool of capital is
then added to by borrowing and other forms of finance. Directors run the company on behalf of shareholders, who receive a share of
the profits. Each shareholder receives a portion or share of the company that is equivalent to what they put in.
A company is seen as a legal entity that is entirely separate from the shareholders.
4. FranchiseFranchises are licensing arrangements whereby an individual or group can buy the right to trade and produce under a
well-known brand name in a given locality. A franchise involves you using another companys successful business model and
name to establish your own business. The franchisee benefits from working for themselves while having the privilege and
reputation associated with a much larger group.

5. Limited liabilityLimited liabilities are intended to benefit professional partnerships such as lawyers, doctors etc. They offer a form
of business protection for company shareholders and some limited partners. For these individuals, the maximum sum they can lose
from a business venture that goes under, is the sum of money that they invested in the company.
Limited liability allows the members to limit their personal liability if something goes wrong with the business.

3Profitability
Maintaining profitability means making sure that revenue stays ahead of the costs of doing business, according to
James Stephenson, writing for the "Entrepreneur" website. Focus on controlling costs in both production and
operations while maintaining the profit margin on products sold.
Productivity
Employee training, equipment maintenance and new equipment purchases all go into company productivity. Your
objective should be to provide all of the resources your employees need to remain as productive as possible.
Customer Service
Good customer service helps you retain clients and generate repeat revenue. Keeping your customers happy should
be a primary objective of your organization.
Employee Retention
Employee turnover costs you money in lost productivity and the costs associated with recruiting, which include
employment advertising and paying placement agencies. Maintaining a productive and positive employee
environment improves retention, according to the Dun and Bradstreet website.

Core Values
Your company mission statement is a description of the core values of your company, according to the Dun and
Bradstreet website. It is a summary of the beliefs your company holds in regard to customer interaction,
responsibility to the community and employee satisfaction. The company's core values become the objectives
necessary to create a positive corporate culture.
Growth
Growth is planned based on historical data and future projections. Growth requires the careful use of company
resources such as finances and personnel, according to Tim Berry, writing on the "Entrepreneur" website.
Maintain Financing
Even a company with good cash flow needs financing contacts in the event that capital is needed to expand the
organization, according to Tim Berry, writing on the "Entrepreneur" website. Maintaining your ability to finance
operations means that you can prepare for long-term projects and address short-term needs such as payroll and
accounts payable.
Change Management
Change management is the process of preparing your organization for growth and creating processes that
effectively deal with a developing marketplace. The objective of change management is to create a dynamic
organization that is prepared to meet the challenges of your industry.
Marketing
Marketing is more than creating advertising and getting customer input on product changes. It is understanding
consumer buying trends, being able to anticipate product distribution needs and developing business partnerships
that help your organization to improve market share.
Competitive Analysis
A comprehensive analysis of the activities of the competition should be an ongoing business objective for your
organization. Understanding where your products rank in the marketplace helps you to better determine how to
improve your standing among consumers and improve your revenue.

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