Business Economics

BUSINESS: organized effort of individuals to produce and sell, in exchange of money, the goods and services that satisfy society's needs.

ECONOMICS: study the ways in which society allocates resources.

BUSINESS ECONOMICS: how businesses are organized to achieve their desired goals.

In order to achieve goals, business entities have to make decisions.

A BUSINESS ENTITY: is a voluntary association of people organized to carry on a business, using resources as an input, to generate products/services as output, with the aim to generate profits for the owners.

A business needs to make decisions, some one could be very risky, good decisions depend on the quality of information.

ACCOUNTING is the process of identifying, measuring and communicating economic information about a business entity to a VARIETY OF USERS for DECISION MAKING PURPOSES.

• IDENTIFYING → Business transactions
• MEASURING → Analysis, recording & classifying transactions
• COMMUNICATING → Financial statements, internal reports…
• DECISION MAKING → Used by a wide range of decisions by external and internal users

IDENTIFYING BUSINESS TRANSACTIONS: an external exchange of something of value between two or more entities - can be measured and recorded.

• Payment of salaries - time ←→ salaries
• Purchase of a machine - benefit for BE ←→ cost
• Capital contributions by owners - money ←→ profit

MEASURING THE INFORMATION Recording, classifying and grouping business transactions. Similar items are gathered together → relevant information = makes the difference in decision making.

COMMUNICATING

• FINANCIAL STATEMENTS
• INTERNAL DOCUMENTS, REPORTS

DECISION MAKING - The accounting information is useful for internal and external users.

INTERNAL USERS: managers and employees: use information to

• Make decisions concerning operations
• Evaluate business success
• Evaluate alternatives in the use of resources

EXTERNAL USERS: stakeholders → are outside the business but may have interest on the performance of the entity but uses accounting information in order to make decisions on the entity.

• Bank → it's risky to give a loan
• Brokers → it's good to buy shares on the stock market
• Government → taxes on the income
• Suppliers → ability to pay the purchase
• Employees → job security, salaries, career opportunity
• Community → info about social and environmental aspects

BUSINESS

organized effort of individuals to produce and sell, in exchange of money, the goods and services that satisfy society's needs.

ECONOMICS

study the ways in which society allocates resources and the consequences of this decision.

BUSINESS ECONOMICS

how businesses are organized to achieve their desired goals. In order to achieve goals business entities have to make decisions.

A BUSINESS ENTITY

is a voluntary association of people organized to carry on a business, using resources as an input, to generate products/services as output, with the aim to generate profits for the owners.

A business needs to make decisions, some one could be very risky, good decisions depend on the quality of information.

ACCOUNTING

is the process of identifying, measuring and communicating economic information about a business entity to a VARIETY OF USERS for DECISION MAKING PURPOSES.

• IDENTIFYING → business transactions
• MEASURING → analysis, recording & classifying transactions
• COMMUNICATING ➔ via financial statements, internal reports...
• DECISION MAKING ➔ used by a range of decisions by external and internal users

IDENTIFYING BUSINESS TRANSACTIONS

an external exchange of something of value between two or more entities ➔ can be measured and recorded.

• payment of salaries ➔ time ↔ salaries
• purchase of machine ➔ benefit for BE ↔ cost
• capital contributed by owners ➔ money ↔ profit

MEASURING

THE INFORMATION ➔ recording, classifying and grouping business transactions. Similar items are gathered together. Relevant information ➔ makes the difference in decision making!

COMMUNICATING

• - FINANCIAL STATEMENTS
• - INTERNAL DOCUMENTS, REPORTS

DECISION MAKING

The accounting info. are useful for INTERNAL users and EXTERNAL users.

INTERNAL USERS

• managers and employe