Accounting：The Basis for Business Decision.doc

Text A Accounting：The Basis for Business Decision Accounting is the information system that measures business activities,processes that information into reports,and communicates the results to decision-makers.Accounting is not the same as bookkeeping.Bookkeeping is a procedure in accounting,just as arithmetic is a procedure in mathematics.Accounting is often called the language of business.The better you understand this language,the better your business decisions will be,and the better you can manage the financial aspects of living.Personal financial planning,education expenses,loans,car payments,income taxes,and investments are based on the information system that we call accounting. Today people use computers to do detailed bookkeeping---in households,businesses,and organizations of all types.The process starts and ends with people making decisions.Virtually all businesses and most individuals keep accounting records to aid in making decisions. Individuals People such as you use accounting information to manage bank accounts,evaluate job prospects,make investments,and decide whether to rent or buy a house. Businesses Business managers use accounting information to set goals for their organizations,to evaluate progress toward those goals,and to take corrective action if necessary.Decisions based on accounting information may include which building to purchase,how much merchandise to keep on hand,and how much cash to borrow. Investors Investors provide the money a business needs to begin operations.To decide whether to invest in a company,potential investors evaluate what income they can expect from their investment.This means analyzing the financial statements of the business and keeping up with developments in the business press--for example,The Wall Street Journal and Business Week. Creditors Before making a loan,creditors (lenders) such as banks determine the borrowers ability to meet scheduled payments.This evaluation includes a report on