Financial Accounting: An Integrated Statements Approach, 2nd Edition

BUSINESS ACTIVITIES

Regardless of whether the company is MicrosoftorGeneral Electric, all businesses are

engaged in the activities of financing, investing, and operating, as shown at the top of

page 11. First, a business must obtain the necessary funds to finance the costs to organize,

pay legal fees, and pay other startup costs. Next, a business must invest funds in the

necessary assets such as buildings and equipment to begin operations. For example,

Milton Hershey invested in the German chocolate-making machinery he saw at the

Chicago International Exposition. Finally, a business must utilize its assets and resources

to implement its business emphasis. Milton Hershey’s business emphasis was to mass-

produce chocolate candies at an affordable cost.

As we will discuss later in this chapter, a major role of accounting is to provide

stakeholders with information on the financing, investing, and operating activities of

businesses. Financial statements are one source of such information.

Financing Activities

Financing activitiesinvolve obtaining funds to begin and operate a business.

Businesses seek financing through the use of capital markets. This financing may take

the form of borrowing or issuing shares of ownership. Most major businesses use both

means of financing.

10 Chapter 1 The Role of Accounting in Business

Describe the three business

activities of financing,

investing, and operating.

2

Stakeholders

Employees/

Managers

Customers Suppliers

Bank and/or Government

Owners

Business

International Perspective

While Hershey’s main

market is in the United

States, the company also

exports chocolates to over

90 countries around the

globe.