POA_En_ch01.ppt

1、Chapter 1,Accounting in Action,Learning Objectives After studying this chapter, you should be able to: Explain what balance sheet and income statement are. Explain what accounting is. Identify the users and uses of accounting. Identify the major branches of accounting. State the accounting equation,

2、 and define its components. Analyze the effects of business transactions on the accounting equation. Understand the four financial statements and how they are prepared. Understand why ethics is a fundamental business concept,Chapter 1,Accounting in Action,Learning Objectives After studying this chap

3、ter, you should be able to: Explain accounting standards-setters and their standards. Explain measurement principles. Explain the four accounting assumption. Explain the three forms of business organization. Explain the mechanism that ensures the usefulness of accounting information. Explain what to

4、 learn in financial accounting course,Preview of Chapter 1,ACCOUNTING IN ACTION,Your own balance sheet A companys balance sheet and income statement,Three activities Who use accounting data? Major branches of accounting,What is Accounting,Assets Liabilities Equity,The Basic Accounting Equation,Trans

5、action Analysis,Using the Accounting Equation,Income Statement Statement of financial position Statement of changes equity Statement of cash flows,Financial Statements,Beginning Stories,Ethics in Financial Reporting Accounting Standards Measurement Principles Assumptions Other issues,Building Blocks

6、 of Accounting,Prepare your own balance sheet. List all your personal properties Identify where the capital comes from Combine the two lists into one table, you get your balance sheet,Beginning Stories,LO 1 Explain what balance sheet and income statement are,Prepare a companys balance sheet and inco

7、me statement. Set up a new company, prepare its balance sheet Do business till the 1st month ends. Prepare the balance sheet at the end of the 1st month. Prepare an income statement for the 1st month,Beginning Stories,LO 1 Explain what balance sheet and income statement are,Think it over What inform

8、ation does a balance sheet give? What information does an income statement give,Beginning Stories,LO 1 Explain what balance sheet and income statement are,LO 2 Explain what accounting is,Accounting consists of three basic activities - it identifies the economic events of an organization Records the

9、events, and communicates summarized information about the events to interested users, via financial reports,What is Accounting,Three Activities,Illustration 1-1 The activities of the accounting process,The accounting process includes the bookkeeping function,What is Accounting,LO 2 Explain what acco

10、unting is,Management,Human Resources,Taxing Authorities,Labor Unions,Regulatory Agencies,Marketing,Finance,Investors,Creditors,Customers,Internal Users,External Users,Who Uses Accounting Data,LO 3 Identify the users and uses of accounting,Common Questions Asked,User,1. Can we afford to give our empl

11、oyees a pay raise,Human Resources,2. Did the company earn a satisfactory income,Should any product lines be eliminated,4. Is cash sufficient to pay dividends to shareholders,5. What price for our product will maximize net income,6. Will the company be able to pay its debts,Investors,Management,Finan

12、ce,Marketing,Creditors,Who Uses Accounting Data,LO 3 Identify the users and uses of accounting,Management Accounting focuses on how to provide accounting information to inside users. Financial Accounting focuses on how to provide accounting information to outside users. Auditing focuses on how to at

13、test the fairness of companies financial statements. Principles of Accounting is a fundamental course of financial accounting,Branches of Accounting,LO 4 Identify the major branch of accounting,Assets,Liabilities,Equity,Provides the underlying framework for recording and summarizing economic events.

14、 Applies to all economic entities regardless of size,The Basic Accounting Equation,LO 5 State the accounting equation, and define its components,Assets,Resources a business owns or controls. Provide future services or benefits. Cash, Inventory, Equipment, etc,Assets,Liabilities,Equity,LO 5 State the

15、 accounting equation, and define its components,The Basic Accounting Equation,Liabilities,Assets,Liabilities,Equity,LO 5 State the accounting equation, and define its components,The Basic Accounting Equation,Claims against assets (debts and obligations). Creditors - party to whom money is owed. Acco

16、unts payable, Notes payable, etc,Ownership claim on total assets. Referred to as residual equity. Share capital-ordinary and retained earnings,Equity,Assets,Liabilities,Equity,LO 5 State the accounting equation, and define its components,The Basic Accounting Equation,Revenues result from business ac

17、tivities entered into for the purpose of earning income. Generally results from selling merchandise, performing services, renting property, and lending money,Illustration 1-7,LO 5 State the accounting equation, and define its components,The Basic Accounting Equation,Expenses are the cost of assets c

18、onsumed or services used in the process of earning revenue. Common expenses are salaries expense, rent expense, interest expense, property tax expense, etc,Illustration 1-7,LO 5 State the accounting equation, and define its components,The Basic Accounting Equation,Dividends are the distribution of c

19、ash or other assets to shareholders. Reduce retained earnings Not an expense,Illustration 1-7,LO 5 State the accounting equation, and define its components,The Basic Accounting Equation,Classification,Classify the following items as issuance of shares, dividends, revenues, or expenses. Then indicate

20、 whether each item increases or decreases equity,Rent expense Service revenue Dividends Salaries expense,LO 5 State the accounting equation, and define its components,Effect on Equity,Expense,Decrease,Revenue,Increase,Equity,Decrease,Expense,Decrease,Transactions are a businesss economic events reco

21、rded by accountants. May be external or internal. Not all activities represent transactions. Each transaction has a dual effect on the accounting equation,LO 6 Analyze the effects of business transactions on the accounting equation,Using the Accounting Equation,Illustration: Are the following events

22、 recorded in the accounting records,Event,Purchase computer,Criterion,Is the financial position (assets, liabilities, or equity) of the company changed,Discuss product design with customer,Pay rent,Record/ Dont Record,LO 6 Analyze the effects of business transactions on the accounting equation,Using

23、 the Accounting Equation,Illustration 1-8,LO 6 Analyze the effects of business transactions on the accounting equation,Using the Accounting Equation,Illustration 1-9 Expanded accounting equation,Transaction Analysis,LO 6,Transaction Analysis,Transaction (1). Investment by Shareholders. Ray and Barba

24、ra Neal decides to open a computer programming service which he names Softbyte. On September 1, 2014, they invest 15,000 cash in exchange for 15,000 of ordinary shares,Illustration 1-10,LO 6,Transaction Analysis,Illustration 1-10,Transaction (2). Purchase of Equipment for Cash. Softbyte purchases co

25、mputer equipment for 7,000 cash,LO 6,Transaction Analysis,Illustration 1-10,Transaction (3). Purchase of Supplies on Credit. Softbyte purchases for 1,600 from Acme Supply Company computer paper and other supplies expected to last several months. The purchase is on account,LO 6,Transaction Analysis,I

26、llustration 1-10,Transaction (4). Services Provided for Cash. Softbyte receives 1,200 cash from customers for programming services it has provided,LO 6,Transaction Analysis,Illustration 1-10,Transaction (5). Purchase of Advertising on Credit. Softbyte receives a bill for 250 from the Daily News for

27、advertising but postpones payment until a later date,LO 6,Transaction Analysis,Illustration 1-10,Transaction (6). Services Provided for Cash and Credit. Softbyte provides 3,500 of programming services for customers. The company receives cash of 1,500 from customers, and it bills the balance of 2,000

28、 on account,LO 6,Transaction Analysis,Illustration 1-10,Transaction (7). Payment of Expenses. Softbyte pays the following expenses in cash for September: store rent 600, salaries and wages of employees 900, and utilities 200,LO 6,Transaction Analysis,Illustration 1-10,Transaction (8). Payment of Acc

29、ounts Payable. Softbyte pays its 250 Daily News bill in cash,LO 6,Transaction Analysis,Illustration 1-10,Transaction (9). Receipt of Cash on Account. Softbyte receives 600 in cash from customers who had been billed for services in Transaction (6,LO 6,Transaction Analysis,Illustration 1-10,Transactio

30、n (10). Dividends. The corporation pays a dividend of 1,300 in cash,Financial Statements,Financial statements（財(cái)務(wù)報(bào)表） summarize the financial effects of the recorded events of an entity during an accounting period. The financial effects are referred to as financial position（財(cái)務(wù)狀況） and financial perform

31、ance（財(cái)務(wù)業(yè)績） of an entity. General purpose financial statements（通用財(cái)務(wù)報(bào)表） are those intended to meet the needs of users who are not in a position to require an entity to prepare reports tailored to their particular information needs,LO 7 Understand the four financial statements and how they are prepared

32、,Balance Sheet,Statement of Cash Flows,Statement of Comprehensive Income,Statement of Changes in Equity,Notes to financial statements,Financial Statements,A complete set of financial statements includes,LO 7 Understand the four financial statements and how they are prepared,An expansion of income st

33、atement,Includes retained earnings statement,Financial Statements,To provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions. To show the results of the managements stewardship(受托責(zé)任) of t

34、he resources entrusted to it,Objectives of financial statements,LO 7 Understand the four financial statements and how they are prepared,Net income is needed to determine the ending balance in retained earnings,Financial Statements,Illustration 1-11 Financial statements and their interrelationships,L

35、O 7,The ending balance in retained earnings is needed in preparing the balance sheet,Financial Statements,Illustration 1-11,LO 7,Financial Statements,Illustration 1-11,LO 8,The balance sheet reports the financial position at a point in time (end of the quarter or year). The Balance Sheet is also cal

36、led: Statement of Financial Position,Financial Statements,The Four Financial Statements,Balance sheet Sept 30, 2013 Asset xx - Liability xx Equity xx,LO 7 Understand the four financial statements and how they are prepared,Statement of cash flow provides information about the cash receipts and paymen

37、ts of an entity during a given period,Balance sheet (Beginning) Asset xx Cash x - Liability xx Equity xx,SCF (Current period) Cash inflow xx - Cash outflow xx Net cash inflow xx,Balance sheet (Ending) Asset xx Cash x - Liability xx Equity xx,Financial Statements,The Four Financial Statements,LO 7 Un

38、derstand the four financial statements and how they are prepared,Income statement provides information about the financial performance of an entity during a given period,Balance sheet (Beginning) Asset xx - Liability xx Equity xx RE x,Income statement (Current period) Revenue xx - Expense xx Net inc

39、ome xx,Balance sheet (Ending) Asset xx - Liability xx Equity xx RE x,Financial Statements,The Four Financial Statements,LO 7 Understand the four financial statements and how they are prepared,Statement of changes in equity provides information about the change of each item of an entitys equity durin

40、g a given period,Balance sheet (Beginning) Asset xx Cash x - Liability xx Equity xx,SCE (Current period) CC RE Tot Beginning x x xx +New invest. x +Net income x -Divident x Ending x x xx,Balance sheet (Ending) Asset xx Cash x - Liability xx Equity xx,Financial Statements,The Four Financial Statement

41、s,LO 7 Understand the four financial statements and how they are prepared,Which of the following financial statements is prepared as of a specific date? Statement of financial position. Income statement. Retained earnings statement. Statement of cash flows,LO 7 Understand the four financial statemen

42、ts and how they are prepared,Financial Statements,Question,The balance sheet is represented by the fundamental accounting equation: Assets = Liabilities + Shareholders Equity A = L + SE The effects of all business transactions may be represented in this formula,Financial Statements,Balance Sheet,LO

43、7 Understand the four financial statements and how they are prepared,Financial Statements,Balance Sheet,LO 7 Understand the four financial statements and how they are prepared,Illustration 4-17,Standard Classifications,Assets that do not have physical substance,Balance Sheet - Intangible Assets,Illu

44、stration 4-19,Financial Statements,開發(fā)支出 商譽(yù) 其他無形資產(chǎn),LO 7 Understand the four financial statements and how they are prepared,Patents and copyrights are Current assets. Intangible assets. Long-term investments. Property, plant, and equipment,Balance Sheet - Question,Financial Statements,LO 7 Understand

45、the four financial statements and how they are prepared,Long useful lives. Currently used in operations. Depreciation - allocating the cost of assets to a number of years. Accumulated depreciation - total amount of depreciation expensed thus far in the assets life,Financial Statements,LO 7 Understan

46、d the four financial statements and how they are prepared,Balance Sheet - Property, Plant, and Equipment,Balance Sheet - Property, Plant, and Equipment,Illustration 4-20,Financial Statements,LO 7 Understand the four financial statements and how they are prepared,Investments in ordinary shares and bo

47、nds of other companies. Investments in non-current assets such as land or buildings that a company is not using in its operating activities,Balance Sheet - Long-Term Investments,Illustration 4-21,Financial Statements,投資性房地產(chǎn) 對聯(lián)營企業(yè)投資 其他金融資產(chǎn),LO 7 Understand the four financial statements and how they ar

48、e prepared,Assets that a company expects to convert to cash or use up within one year or the operating cycle, whichever is longer. Operating cycle is the average time it takes from the purchase of inventory to the collection of cash from customers,Balance Sheet - Current Assets,Financial Statements,

49、LO 7 Understand the four financial statements and how they are prepared,The operating cycle of a merchandising company ordinarily is longer than that of a service company,Illustration 5-2,LO 1 Identify the differences between service and merchandising companies,Operating Cycles,Financial Statements,

50、Illustration 5-3,LO 7 Understand the four financial statements and how they are prepared,Usually listed in the reverse order they expect to convert them into cash,Balance Sheet - Current Assets,Illustration 4-22,Financial Statements,存貨 應(yīng)收款項(xiàng) 衍生金融工具 遞延所得稅資產(chǎn) 短期投資 現(xiàn)金及現(xiàn)金等值,LO 7 Understand the four financ

51、ial statements and how they are prepared,Proprietorship - one capital account. Partnership - capital account for each partner. Corporation Contributed capital and Earned capital,Balance Sheet - Equity,Illustration 4-23,Financial Statements,股本 股本溢價(jià) 其他公積金 留存收益,LO 7 Understand the four financial statem

52、ents and how they are prepared,Obligations a company expects to pay after one year,Balance Sheet - Non-Current Liabilities,Illustration 4-24,Financial Statements,長期負(fù)債 養(yǎng)老金計(jì)劃及類似承諾 預(yù)計(jì)負(fù)債 遞延所得稅負(fù)債 其他非流動(dòng)負(fù)債,LO 7 Understand the four financial statements and how they are prepared,Obligations company is to pay

53、 within the coming year or its operating cycle, whichever is longer. Usually list notes payable first, followed by accounts payable. Other items follow in order of magnitude. Liquidity ability to pay obligations expected to be due within the next year,Balance Sheet - Current Liabilities,Financial St

54、atements,LO 7 Understand the four financial statements and how they are prepared,Illustration 4-25,Balance Sheet - Current Liabilities,Financial Statements,應(yīng)付賬款 短期預(yù)計(jì)負(fù)債 其他短期金融負(fù)債 應(yīng)交所得稅 一年內(nèi)到期的長期負(fù)債 其他流動(dòng)負(fù)債,LO 7 Understand the four financial statements and how they are prepared,The following accounts were

55、 taken from the financial statements of Callahan Company. Match each of the following accounts to its proper statement of financial position classification, shown below. If the item would not appear on a statement of financial position, use “NA.” Current assets (CA) Current liabilities (CL) Long-ter

56、m investments (LTI) Non-current liabilities (NCL) Property, plant, and equipment (PPE) Equity (E) Intangible assets (IA,LO 7,Primary source of information for evaluating a companys performance. Format is designed to differentiate between the various sources of income and expense,Financial Statements

57、,Income Statement,LO 7 Understand the four financial statements and how they are prepared,Basic formula Revenues and gains x Less: Expenses and losses x Net profit or loss x Net profit or loss also referred to as net income,Financial Statements,Income Statement,LO 7 Understand the four financial sta

58、tements and how they are prepared,Income statement includes two elements (IFRS): Income consist of revenue and gain. Revenue refers to increases in equity as a result of ongoing, major operation of an entity. Gain refers to increase in equity as a result of peripheral activities of an entity, other

59、than those relating to contributions from owners. Expenses consist of expenses and losses. Expense refers to decreases in equity as a result of ongoing, major operation of an entity. Loss refers to decrease in equity as a result of peripheral activities of an entity, other than those relating to dis

60、tributions to owners,Financial Statements,Income Statement,LO 7 Understand the four financial statements and how they are prepared,Income statement is usually organized under multiple-step format. Operating revenue x Less: Operating expense (x) Income from operation x Other revenue and gains x Other