Exam 21: Business Basics

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All businesses operate using the same basic element,the transaction.A transaction is an exchange or transfer of goods,services,or funds involving two or more people.Each time a transaction occurs a source document captures all of the key data involved with the transaction.The source document describes the basic transaction data such as its date,purpose,and amount and includes cash receipts,cancelled checks,invoices,customer refunds,employee time sheet,etc.The source document is the beginning step in the accounting process and serves as evidence that the transaction occurred.Financial statements are the written records of the financial status of the business that allow interested parties to evaluate the profitability and solvency of the business.Solvency represents the ability of the business to pay its bills and service its debt.The financial statements are the final product of the accountant's analysis of the business transactions.Preparing the financial statements is a major undertaking and requires a significant amount of effort.Financial statements must be understandable,timely,relevant,fair,and objective in order to be useful.The accounting department prepares all of the financial statements.

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Sales is the function of selling a good or service and focuses on increasing customer sales,which increases company revenues.A salesperson has the main activity of selling a product or service.Many industries require a license before a salesperson can sell the products,such as real estate,insurance,and securities.Marketing is the process associated with promoting the sale of goods or services.The marketing department supports the sales department by creating promotions that help sell the company's products.Marketing communications seek to build product or service awareness and to educate potential consumers on the product or service.The classic components of marketing include the four Ps in the marketing mix: product,price,place,and promotion.The marketing mix includes the variables that marketing managers can control in order to best satisfy customers in the target market.Product - the physical product or service offered to the consumer.Product decisions include function,appearance,packaging,service,warranty,etc.Price - takes into account profit margins and competitor pricing.Pricing includes list price,discounts,financing,and other options such as leasing.Place (distribution)- associated with channels of distribution that serve as the means for getting the product to the target customers.Attributes involved in place decisions include market coverage,channel member selection,logistics,and levels of service.Promotion - related to the communication and selling to potential consumers.An organization can perform a break-even analysis when making promotion decisions.If an organization knows the value of each customer,it can determine whether additional customers are worth the coast of acquisition.Attributes involved in promotion decisions involve advertising,public relations,media types,etc.