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CHAPTER 1 Introduction Learning objectives By the end of this chapter you should be able to: Understand the different sectors in the economy Understand the main forms of business organisation within the private sector Understand how the accounting equation can be used and what it represents. |
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Introduction The purpose of this book is to introduce you to the basics of business accounting. This book will cover the basics of the system of financial accounting – from the basics of double-entry bookkeeping to the construction of the financial statements for a simple small business. Although much of this book is aimed at the financial accounts of the sole trader, we will also have a look at the financial accounting practices employed by the limited company. This opening chapter aims to prepare you for what lies ahead. We will consider the various types of business organisation that you come across in your studies and what their major aims are as businesses. Accounting is often seen as a jargon-heavy subject and in this chapter we will also introduce you to some of the terms and concepts that you will be coming across throughout this textbook. This is potentially a confusing area – not helped by changes in some of the terminology over recent years. This text-book uses the most up-to-date terminology possible but at the same time will keep you informed of older terminology. |
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Sectors in the economy It is common to classify economic activity into two sectors: the public sector and the private sector. The public sector The public sector is owned and controlled by the government. This covers all levels of government – from local to central government – and includes all the organisations which are funded by the taxpayer. The public sector is not as large as, say, thirty years ago, due to successive governments pursuing a policy of privatisation (transferring organisations from the public to the private sector), but it still accounts for a significant proportion of the business activity in the UK. Examples of public sector activity in the UK include the National Health Service and the provision of libraries. The private sector The private sector consists of businesses owned and controlled by private individuals acting either on their own or in groups. Although private sector organisations have to comply with laws and regulations set out by the government, these businesses are free to pursue their own ends. It is business organisations within the private sector that this textbook will be exploring. |
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