Page 410 - Introduction to Business

384 PART 4 Accounting

EXHIBIT 11.3 reports, such as aging of accounts receivable
and sales analyses, by product, by customer, or
Components of the Management Information System
by salesperson. In the case of the personnel
system, the AIS handles a number of critical
record-keeping chores. The AIS maintains the
Accounting Marketing
information information payroll files, which include information on
system system employee pay rates, federal income tax with-
holding rates, social security tax, and other
deductions. The AIS processes the paychecks
The
Data processing Management Production that are ultimately distributed by the other
information Information information
system System system departments.
reality In your most recent job, what
CH ECK
Human resource Internal audit interactions did you have with
information information accounting information and how did that affect
system system your job?

Accounting for International Trade

LEARNING OBJECTIVE 3
Briefly recount accounting issues associated with international business, such as the importance of
International Accounting Standards and International Standards on Auditing.
As far back as recorded history, peoples of the world have been engaged in global
commerce. For as long as international trade has occurred, accounting has been
necessary to record and report the results. International operations are increasingly
important to all types of business firms. Many multinational firms are either
expanding international operations or becoming part of other multinational firms
via mergers or acquisitions. As a result, more firms than ever before are providing
products and services to customers around the globe.
Peculiarities of international trade have periodically led to specialized account-
ing treatment. For example, during the seventeenth century, in Elizabethan Eng-
land, expanding overseas business opportunities led to a new type of corporate
entity. Merchants faced various difficulties, including pirates; long, dangerous jour-
neys to transport goods; and frequent hostilities between trading nations. Conse-
quently, trade was an expensive undertaking, filled with risk. In order to benefit
from the business opportunities, merchants joined together to share the risks and
increase productivity.
East India Company The first joint- In 1600 the first joint-stock company, the East India Company, was given its
stock company, which was given its charter by Queen Elizabeth. The charter provided the legal right to be one corpo-
charter by Queen Elizabeth in 1600
and achieved fame for engaging in rate body to about 220 “adventurers.” The charter also provided for corporate suc-
international trade in the early days of cession with power to admit and expel members; to receive, hold and grant prop-
the British Empire erty; to sue and be sued in the corporate name; and to use a common seal. Funds
were collected from a broad array of investors, including earls, dukes, merchants,
and tradespeople. Management directed business operations and ensured that
shareholders received their portion of the profits.
East India Company transactions led to awkward reporting problems. The
accountants and auditors of that time period complained of the difficulty in keep-
ing accounts up-to-date. The most difficult accounting problem resulted when
operations of several voyages overlapped in the same time period. Much to its own
confusion and embarrassment, the firm was unable to segregate the accounting for
the activities of individual trading voyages.
Copyright 2010 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.