Instructor Manual
Warren/Jones/Tayler, Financial & Managerial Accounting, 17e, 2026, 9798214040288; Chapter
1: Introduction to Accounting and Business
TABLE OF CONTENTS
Purpose and Perspective of the Chapter......................................................................2
Chapter Objectives........................................................................................................2
Complete List of Chapter Activities and Assessments.................................................3
Key Terms.....................................................................................................................3
What’s New in This Chapter........................................................................................7
Chapter Outline.............................................................................................................7
Additional Discussion Questions................................................................................10
Additional Resources..................................................................................................11
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 1
publicly accessible website, in whole or in part.
,PURPOSE AND PERSPECTIVE OF THE CHAPTER
The purpose of this chapter is to introduce students to business and accounting. For many students,
Chapter 1 of Corporate Financial Accounting is their first taste of the business or accounting disciplines.
The teaching challenge is to get students to understand and accept the importance of learning business and
accounting concepts. This will make the course more than just another requirement that students must
complete to graduate. Because this chapter will set the tone for the entire course and the students’
business careers, avoid the temptation to rush through the material.
Chapter 1 begins with a discussion of the nature of business and accounting and the different types of
businesses (service, merchandising, and manufacturing). Next, the chapter describes the role of
accounting in business. The chapter then moves on to business ethics and discusses how individual
character, firm culture, and laws and enforcement affect ethics as well as examples of accounting/business
fraud. Opportunities in accounting professions/careers are discussed. Following this introductory
information, the text explains generally accepted accounting principles (GAAP), the characteristics of
financial information, and the assumptions that form the basis of GAAP. The forms of business entities
(proprietorships, partnerships, corporations, and limited liability companies) are described. The four
principles of financial accounting (measurement, historical cost, revenue recognition, and expense
recognition) are defined. The accounting equation is introduced, and then the discussion of how business
transactions affect accounts in the accounting equation begins. When transactions are analyzed, changes
in assets, liabilities, and stockholders’ equity are stated as “increases” or “decreases”; the terms debit and
credit are not introduced until Chapter 2. The components of the accounting equation are discussed using
several transactions for a business called NetSolutions. Next are examples of how to prepare the four
primary financial statements using the accounting equation information and explanations of how the four
financial statements are interrelated. The chapter ends with an explanation of the ratio of liabilities to
stockholders’ equity and how it is particularly important to creditors.
CHAPTER OBJECTIVES
The following objectives are addressed in this chapter:
Obj. 1 Describe the nature of business and the role of accounting and ethics in business.
Obj. 2 Describe generally accepted accounting principles, including the underlying assumptions and
principles.
Obj. 3 State the accounting equation and define each element of the equation.
Obj. 4 Describe and illustrate how business transactions can be recorded in terms of the resulting change
in the elements of the accounting equation.
Obj. 5 Describe the financial statements of a corporation and explain how they interrelate.
Obj. 6 Describe and illustrate the use of the ratio of liabilities to stockholders’ equity in evaluating a
company’s financial condition.
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 2
publicly accessible website, in whole or in part.
,COMPLETE LIST OF CHAPTER ACTIVITIES AND
ASSESSMENTS
The following table organizes activities and assessments by objective, so that you can see how all this
content relates to objectives and make decisions about which content you would like to emphasize in your
class based on your objectives. For additional guidance, refer to the Teaching Online Guide.
Chapter Objective Activity/Assessment Source (i.e., PPT slide, Workbook)
Obj. 1 Knowledge Check Activity 1 PPT Slides 5–6
Obj. 2 Discussion Activity 1 PPT Slides 22–23
Obj. 3 Discussion Activity 2 PPT Slides 25–26
Obj. 4 Knowledge Check Activity 2 PPT Slides 41–42
Obj. 5 Knowledge Check Activity 3 PPT Slides 54–55
[return to top]
KEY TERMS
Account payable: The liability created by a purchase on account.
Account receivable: An asset, which is a claim against the customer created by selling merchandise
or services on credit.
Accounting: An information system that measures, records, and reports financial information about a
company that assists and supports user decision making.
Accounting assumptions: Assumptions that provide the framework upon which accounting
standards are constructed.
Accounting equation: The equation that shows the relationship among assets, liabilities, and equity;
expressed as Assets = Liabilities + Equity.
Accounting principles: Principles that provide the framework upon which accounting standards are
constructed.
Accounting standards: The rules that determine the accounting for individual business transactions.
Accounting Standards Codification: An electronic database maintained by the Financial
Accounting Standards Board (FASB) that contains all of the accounting standards that make up the
generally accepted accounting principles (GAAP).
Accounting Standards Updates: Published changes to accounting standards that are the source of
updates to the Accounting Standards Codification.
Arm’s-length transactions: Transactions between two independent parties.
Assets: The resources owned by a business.
Balance sheet: A list of the assets, liabilities, and stockholders’ equity as of a specific date, usually at
the close of the last day of a month or a year.
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 3
publicly accessible website, in whole or in part.
, Business: An organization in which basic resources (inputs), such as materials and labor, are assembled
and processed to provide goods or services (outputs) to customers.
Business entity assumption: A concept of accounting that limits the economic data in the
accounting system to data related directly to the activities of the business.
Business transaction: An economic event or condition that directly changes an entity’s financial
condition or directly affects its results of operations.
Certified Public Accountants (CPAs): Public accountants who have met a state’s education,
experience, and examination requirements.
Common stock: Certificates issued by a corporation to investors as proof of their ownership rights; an
account representing the ownership rights of investors in a corporation; a class of stock issued by a
corporation that bears no preference rights.
Comparability: A secondary characteristic of financial information; comparability includes consistent
reporting, that allows users to identify similarities and differences among reported items.
Corporation: A business organized under state or federal statutes as a separate legal entity.
Cost principle: A concept of accounting that states that an asset should be recorded and maintained in
the accounting records at its initial transaction price.
Data analytics: The science of analyzing raw data to discover patterns, identify anomalies, or gain
other useful insights.
Dividends: Distributions of earnings to stockholders; an account representing the distribution of a
corporation’s earnings to stockholders.
Earnings: The amount by which revenues exceed expenses.
Equity: The rights of the owners of a business.
Ethics: Moral principles that guide the conduct of individuals.
Expense recognition principle: A principle, sometimes called the matching principle, that requires
expenses to be recorded in the same period as the related revenue; a concept of accounting in which
expenses are matched with the revenue generated during a period by those expenses.
Expenses: Amounts used to generate revenue; assets used up or services consumed in the process of
generating revenues.
Faithful representation: A characteristic of financial reports that pertains to information accurately
reflecting an entity’s economic activity or condition.
Fees earned: Revenue from providing services.
Financial accounting: The branch of accounting that is concerned with recording transactions using
generally accepted accounting principles (GAAP) for a business or other economic unit and with a
periodic preparation of various statements from such records.
Financial Accounting Standards Board (FASB): The authoritative body that has the primary
responsibility for developing accounting principles.
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 4
publicly accessible website, in whole or in part.
Warren/Jones/Tayler, Financial & Managerial Accounting, 17e, 2026, 9798214040288; Chapter
1: Introduction to Accounting and Business
TABLE OF CONTENTS
Purpose and Perspective of the Chapter......................................................................2
Chapter Objectives........................................................................................................2
Complete List of Chapter Activities and Assessments.................................................3
Key Terms.....................................................................................................................3
What’s New in This Chapter........................................................................................7
Chapter Outline.............................................................................................................7
Additional Discussion Questions................................................................................10
Additional Resources..................................................................................................11
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 1
publicly accessible website, in whole or in part.
,PURPOSE AND PERSPECTIVE OF THE CHAPTER
The purpose of this chapter is to introduce students to business and accounting. For many students,
Chapter 1 of Corporate Financial Accounting is their first taste of the business or accounting disciplines.
The teaching challenge is to get students to understand and accept the importance of learning business and
accounting concepts. This will make the course more than just another requirement that students must
complete to graduate. Because this chapter will set the tone for the entire course and the students’
business careers, avoid the temptation to rush through the material.
Chapter 1 begins with a discussion of the nature of business and accounting and the different types of
businesses (service, merchandising, and manufacturing). Next, the chapter describes the role of
accounting in business. The chapter then moves on to business ethics and discusses how individual
character, firm culture, and laws and enforcement affect ethics as well as examples of accounting/business
fraud. Opportunities in accounting professions/careers are discussed. Following this introductory
information, the text explains generally accepted accounting principles (GAAP), the characteristics of
financial information, and the assumptions that form the basis of GAAP. The forms of business entities
(proprietorships, partnerships, corporations, and limited liability companies) are described. The four
principles of financial accounting (measurement, historical cost, revenue recognition, and expense
recognition) are defined. The accounting equation is introduced, and then the discussion of how business
transactions affect accounts in the accounting equation begins. When transactions are analyzed, changes
in assets, liabilities, and stockholders’ equity are stated as “increases” or “decreases”; the terms debit and
credit are not introduced until Chapter 2. The components of the accounting equation are discussed using
several transactions for a business called NetSolutions. Next are examples of how to prepare the four
primary financial statements using the accounting equation information and explanations of how the four
financial statements are interrelated. The chapter ends with an explanation of the ratio of liabilities to
stockholders’ equity and how it is particularly important to creditors.
CHAPTER OBJECTIVES
The following objectives are addressed in this chapter:
Obj. 1 Describe the nature of business and the role of accounting and ethics in business.
Obj. 2 Describe generally accepted accounting principles, including the underlying assumptions and
principles.
Obj. 3 State the accounting equation and define each element of the equation.
Obj. 4 Describe and illustrate how business transactions can be recorded in terms of the resulting change
in the elements of the accounting equation.
Obj. 5 Describe the financial statements of a corporation and explain how they interrelate.
Obj. 6 Describe and illustrate the use of the ratio of liabilities to stockholders’ equity in evaluating a
company’s financial condition.
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 2
publicly accessible website, in whole or in part.
,COMPLETE LIST OF CHAPTER ACTIVITIES AND
ASSESSMENTS
The following table organizes activities and assessments by objective, so that you can see how all this
content relates to objectives and make decisions about which content you would like to emphasize in your
class based on your objectives. For additional guidance, refer to the Teaching Online Guide.
Chapter Objective Activity/Assessment Source (i.e., PPT slide, Workbook)
Obj. 1 Knowledge Check Activity 1 PPT Slides 5–6
Obj. 2 Discussion Activity 1 PPT Slides 22–23
Obj. 3 Discussion Activity 2 PPT Slides 25–26
Obj. 4 Knowledge Check Activity 2 PPT Slides 41–42
Obj. 5 Knowledge Check Activity 3 PPT Slides 54–55
[return to top]
KEY TERMS
Account payable: The liability created by a purchase on account.
Account receivable: An asset, which is a claim against the customer created by selling merchandise
or services on credit.
Accounting: An information system that measures, records, and reports financial information about a
company that assists and supports user decision making.
Accounting assumptions: Assumptions that provide the framework upon which accounting
standards are constructed.
Accounting equation: The equation that shows the relationship among assets, liabilities, and equity;
expressed as Assets = Liabilities + Equity.
Accounting principles: Principles that provide the framework upon which accounting standards are
constructed.
Accounting standards: The rules that determine the accounting for individual business transactions.
Accounting Standards Codification: An electronic database maintained by the Financial
Accounting Standards Board (FASB) that contains all of the accounting standards that make up the
generally accepted accounting principles (GAAP).
Accounting Standards Updates: Published changes to accounting standards that are the source of
updates to the Accounting Standards Codification.
Arm’s-length transactions: Transactions between two independent parties.
Assets: The resources owned by a business.
Balance sheet: A list of the assets, liabilities, and stockholders’ equity as of a specific date, usually at
the close of the last day of a month or a year.
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 3
publicly accessible website, in whole or in part.
, Business: An organization in which basic resources (inputs), such as materials and labor, are assembled
and processed to provide goods or services (outputs) to customers.
Business entity assumption: A concept of accounting that limits the economic data in the
accounting system to data related directly to the activities of the business.
Business transaction: An economic event or condition that directly changes an entity’s financial
condition or directly affects its results of operations.
Certified Public Accountants (CPAs): Public accountants who have met a state’s education,
experience, and examination requirements.
Common stock: Certificates issued by a corporation to investors as proof of their ownership rights; an
account representing the ownership rights of investors in a corporation; a class of stock issued by a
corporation that bears no preference rights.
Comparability: A secondary characteristic of financial information; comparability includes consistent
reporting, that allows users to identify similarities and differences among reported items.
Corporation: A business organized under state or federal statutes as a separate legal entity.
Cost principle: A concept of accounting that states that an asset should be recorded and maintained in
the accounting records at its initial transaction price.
Data analytics: The science of analyzing raw data to discover patterns, identify anomalies, or gain
other useful insights.
Dividends: Distributions of earnings to stockholders; an account representing the distribution of a
corporation’s earnings to stockholders.
Earnings: The amount by which revenues exceed expenses.
Equity: The rights of the owners of a business.
Ethics: Moral principles that guide the conduct of individuals.
Expense recognition principle: A principle, sometimes called the matching principle, that requires
expenses to be recorded in the same period as the related revenue; a concept of accounting in which
expenses are matched with the revenue generated during a period by those expenses.
Expenses: Amounts used to generate revenue; assets used up or services consumed in the process of
generating revenues.
Faithful representation: A characteristic of financial reports that pertains to information accurately
reflecting an entity’s economic activity or condition.
Fees earned: Revenue from providing services.
Financial accounting: The branch of accounting that is concerned with recording transactions using
generally accepted accounting principles (GAAP) for a business or other economic unit and with a
periodic preparation of various statements from such records.
Financial Accounting Standards Board (FASB): The authoritative body that has the primary
responsibility for developing accounting principles.
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a 4
publicly accessible website, in whole or in part.
