accounting bccc syllabus sample

8/13/2019 Accounting BCCC Syllabus Sample

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CHAPTER 1

BUSINESS: WHATS IT ALL ABOUT?

CHAPTER OVERVIEW

The chapter begins with a discussion of the purpose of a business, including a discussion of both

for-profit organizations and not-for-profit organizations. Next, the nature of business operationsis discussed. The four types of businesses are discussed: service, merchandising, manufacturing,

and financial services. The first part of the chapter concludes with a discussion of the general

forms of business ownership: sole proprietorships, partnerships, and corporations, including theadvantages and disadvantages of each.

The second part of the chapter begins with a discussion of business activities and the events,

resources, and agents affecting business transactions.

The third part of the chapter discusses the nature of information in general and accounting

information in particular. The users of accounting information are discussed, includingmanagement, regulators, creditors, and investors.

The last part of the chapter is an introductory discussion of the four basic financial statements(each financial statement is discussed in detail in later chapters. The balance sheet is introduced,

along with the accounting elements: assets, liabilities, and shareholders! e"uity. Next, the income

statement is introduced, along with the accounting elements: revenues and expenses. The

statement of changes in shareholders! e"uity is then explained, including the common causes forchanges in the e"uity accounts. #astly, the statement of cash flows is introduced and compared

with the information presented on the income statement.

$t the end of the chapter, there is a short discussion of general business ris%s, including general

strategic ris%s, operating ris%s, financial ris%s, and information ris%s.

LEARNING OBJECTIVES

$fter completing &hapter ', your students should be able to:

1. escribe what a business does and the various ways a business can be organized.2. &lassify business transactions as operating, investing, or financing activities.

3. escribe who uses accounting information and why accounting information is important

to them.

4. )dentify the elements and explain the purpose of the four basic financial statements

*the income statement, the statement of changes in shareholders! e"uity, the balance

sheet, and the statement of cash flows*and be able to use basic transaction analysis toprepare each statement.

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5. )dentify the elements of a real company!s financial statements.

6. escribe the ris%s associated with being in business and the part that ethics plays

in business.

CHAPTER OUTLINE

Purpose an Or!an"#a$"on o% a Bus"ness &LO 1'). $ business is formed to provide goods or services for the purpose of ma%ing a profit for

its owner or owners.

)). To start a business you need capital.a. &apital is the name for the resources used to start and run a business.b. &apital comes from investors (owners.

c. &apital comes from creditors (lenders.

))). 1usinesses can be classified as a for-profit organization or a not-for-profit organization.

a. $ for-profit firmhas the goal of ma%ing a profit for its owners.b. $ not-for-profit firmhas the goal of providing goods or services to its clients.

)2. 1oth types of organizations add value*something customers are willing to pay for.

Teaching Tip

3se /xhibit '.' to explain the concept of adding value.

T(e Na$ure o% Bus"ness Opera$"ons &LO 1'

). The operation of the business depends on what it is organized to do.

)). There are four types of businesses.a. Service organization4 does something for its customers.

b. Merchandising bsiness4 sells a product to its customers.

i. !holesale compan"4 buys goods, adds value, and then sells them to othercompanies.ii. #etail compan"4 buys goods, adds value, and then sells them to customers

who consume them.

c. Manfactrer4 ma%es the products it sells.d. $inancial services firm4 deals in services related to money.

Teaching Tip

$s% the students to suggest examples of each type of business: service, merchandiser,

manufacturer, and financial services. oint out that many businesses are combinations of one or

more types.

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O)ners("p S$ru*$ure o% a Bus"ness &LO 1'

). 1usiness ownership usually ta%es one of three forms:a. Sole proprietorship4 a company with a single owner.

i. Not separate from its owner in terms of responsibility and liability.

ii. The business is the owner and the owner is the business.

b. %artnership4 a company owned by two or more individuals.i. 5imilar to a sole proprietorship.

ii. Not separate from the owners in terms of responsibility and liability.c. &orporations4 a special legal form for a business in which the business is a legal

entity separate from the owners.

i. &an have a single owner or a large number of owners.ii. 6wnership in a corporation is divided into units called shares of common

stoc%.

iii. 6wners are called shareholders or stoc%holders.

iv. Stoc' e(change4 a mar%etplace where buyers and sellers exchange theirshares of stoc%. $lso called a stoc' mar'et.

v. The Secrities and )(change &ommission *S)&+4 the agency thatmonitors the stoc% mar%et and the financial reporting of the firms that trade inthe mar%et.

vi. $dvantages of a corporation include diversification and limited liability.

vii. isadvantages of a corporation include separation of management andownership and double taxation of corporate income. ,ividendsare the

earnings of a corporation distributed to the owners of the corporation.

Teaching Tip

iscuss with the students the advantages and disadvantages of each form of business ownership.

Bus"ness A*$"+"$"es an $(e ,-o) o% Goos an Ser+"*es &LO .'

). $n entrepreneur is a person who starts a business.

)). /ach step in the process of developing a business is classified as an exchange 4 who gets

what and who gives what in return. /xchanges are also called transactions.))). $ transaction is classified as:

a. 6perating 4 related to the general operations of the firm.

b. )nvesting 4 related to buying and selling items that the firm will use for longer than ayear.

c. 7inancing 4 those transactions that deal with how a business gets its funding.

)2. $n exchange or transaction involves who gets what and who gives what in return.2. 8hen an owner invests in the business, it is called a contribution or contributed capital.

a. &ontribted capitalis an owner!s investment in a company.

b. The business gives ownership.

c. The business gets capital.2). 8hen a business repays a loan, it gives the economic resource of cash to the lender. This

amount includes the amount of the loan, called the principal, plus interest, which is the

cost of borrowing money.

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Teaching Tip

3se /xhibit '.9 to illustrate how a business wor%s.

In%or/a$"on Nees %or 0e*"s"on a2"n! "n Bus"ness &LO 3'

). )nformation is needed for decisions, such as:a. 0ow to finance the business

b. 8hat type of business organization to use

c. urchase;ac"uisition decisions.d. 5ales;collection decisions.

Teaching Tip

$s% students how a business comes up with the funds to ac"uire additional assets. #ead students

to see that a company can borrow (liabilities, or use invested funds (shareholders! e"uity, or

hopefully, earn it (also shareholders! e"uity. #ater, you can associate the terms


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oint out that the 5/& only has authority over the accounting rules of public companies*those

whose stoc% is traded on a public exchange.

b. The 5/& has delegated much of its responsibility for setting financial standards to the

$inancial cconting Standards /oard *$S/+. The 7$51 is a group ofprofessional business people, accountants, and accounting scholars who have the

responsibility of setting current accounting standards.c. The %blic &ompan" cconting 0versight /oard *%&0/+is a group formed to

oversee the auditing profession and the audits of public companies.d. The nternational $inancial #eporting Standards *$#S+are international

guidelines for financial reporting, used in many places around the world.

e. The nternational cconting Standards /oard *S/+is the group that setsinternational financial reporting standards.

Teaching Tip

3se /xhibit '.A to illustrate the relationships between the groups responsible for financial

reporting.

))). The nternal #evene Service *#S+is the federal agency responsible for federal taxcollection.

)2. $ certified pblic accontant *&%+is someone who has met specific education and

exam re"uirements set up by individual states to ma%e sure that only individuals with theappropriate "ualifications can perform audits. To sign an audit report, an accountant

must be a &$.

O+er+"e) o% $(e ,"nan*"a- S$a$e/en$s &LO 5'

). 7our basic financial statements:

a. 1alance sheetb. )ncome statement

c. 5tatement of changes in shareholders! e"uity

d. 5tatement of cash flows)). The notes to the financial statementsare the information provided with the four basic

financial statements that describes the company!s maBor accounting policies and provides

other disclosures to help external users better understand the financial statements.

))). 1alance sheeta. The balance sheetshows the accounting e"uation in detail.

b. )t has three parts 4 assets, liabilities, and shareholder!s e"uity.

c. escribes the financial position of the company at a specific point in time.

d. ssetsi. Things of value owned by a business

ii. rovide future benefitiii. 5omeone has a right (or claim to the asset

e. iabilitiesi. &laims to the assets by creditors

ii. $mounts owed to those who have loaned to the companyf. Shareholders eit"

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i. &laims to the assets by the owners

ii. $lso called net assets ($ssets 4 #iabilities

iii. There are two types 4 contributed capital and retained earnings.iv. #etained )arningsis the total of all net income amounts minus all

dividends paid in the life of the company.

g. $ccounting e"uation illustrated by the balance sheet

i. $ssets C &laimsii. $ssets C #iabilities D 6wners! /"uity

h. 0eading

i. Name of the companyii. Name of the financial statement

iii. ate (one specific date

iv. $iscal "earis a year in the life of the business. )t may or may notcoincide with the calendar year.

i. &omparative balance sheetsare the balance sheets from consecutive fiscal years for

a single company.

Teaching Tip

/xplain the balance sheet as a


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d. &ontribted capital$dditions 4 additional investments by owners.

i. eductions 4 not covered in this course.e. Fetained earnings

i. $dditions 4 net income

ii. eductions 4 dividends

f. 5tatement of changes in shareholders! e"uity is the bridge from the income statementto the balance sheet

2). 5tatement of cash flows

a. Statement of cash flosshows all cash collected and disbursed during a period oftime. /ach cash amount is classified as one of three types.

b. &ash from operating activitiesare cash transactions that relate to the everyday,

routine transactions needed to run the business.i. )nflows 4 cash received from customers.

ii. 6utflows 4 cash routinely paid to produce and sell goods and services.

c. &ash from investing activitiesare transactions involving the sale and purchase oflong-term assets used in the business.

i. )nflows 4 cash received from selling long-term productive assets.ii. 6utflows 4 cash paid to ac"uire long-term productive assets.

d. &ash from financing activitiesare transactions related to how a business is financed.i. )nflows 4 cash received from investors (owners or creditors.

ii. 6utflows 4 cash paid to repay loans and ma%e distributions (dividends to

owners.

Teaching Tip

$s an introduction to this topic, as% students where their money comes from and what they use it

for. &ategorize their suggestions as operating, investing, or financing.

'. 6perating 4 salaries;wages from Bobs> rent payments, food, etc.. )nvesting 4 purchasing or selling investments> buying a house9. 7inancing 4 borrowing or repaying money

6r,

5et up three unlabeled columns on the board (or screen, etc.. $s% students to call out any %ind ofactivity associated with a business. Hou can drop each item into the appropriate column and then

as% students to come up with names for the columns.

Teaching Tip

$s% students which of the three activities is most important and why. $lso as% them whetherthey believe cash flows in each area should be a net inflow or a net outflow.

Teaching Tip

$s% students whether they believe a net increase or a net decrease in cash is more desirable.

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Teaching Tip

3se /xhibit '.'? to show how the financial statements are interrelated.

Rea- Co/pan6 ,"nan*"a- S$a$e/en$s &LO 7'

). ublicly traded corporations are ones that sell their stoc% on the public stoc% exchanges.

)). $ll publicly traded corporations must prepare the four financial statements every year.))). 6ne of the most important filings a company can ma%e is the '-I. )t provides a

comprehensive overview of the business.

)2. The '-I must be filed using a computer language called 7/#(/xtensible 1usiness

Feporting #anguage. This is a technology that enables firms to report information in astandardized way that ma%es the data immediately available and interactive.

Bus"ness R"s28 Con$ro-8 an E$("*s &LO 9'

). art of planning and running a business is identifying ris%s.

)). #is'is danger, anything that exposes us to potential inBury or loss.

a. Fis% that a product failure will result in death of consumersb. Fis% that someone will steal assets from the company

c. Fis% that poor "uality inventory will be purchased and sold

))). Fis%s relate to all aspects of the business.a. Jeneral strategic ris%s 4 should we mar%et our cigarettes to teenagers

b. 6perating ris%s 4 should we operate without a bac%up power supply

c. 7inancial ris%s 4 should we borrow money or obtain investorsd. )nformation ris%s 4 should we use a manual accounting system

)2. 8hy ta%e ris%sa. /very ris% has a potential reward.

b. &ontrols are activities performed to minimize or eliminate certain ris%s.

Teaching Tip

$s% students to describe examples of ris%s that relate to a Bob that they have held.

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9

LLLLL '. The primary purpose of a business is to:a. ay taxes to the )F5

b. 5ell a product

c. 5ell goods and;or services to ma%e a profit for the owner(sd. 0elp others

LLLLL . 5ources of capital include:a. 6wners (investors

b. &reditors (lenders

c. 1oth $ and 1

d. None of the above

LLLLL 9. $ll of the following are types of for-profit businesses, except:

a. @erchandising companiesb. 5ervice companies

c. 7inancial service companies

d. &haritable organizations

LLLLL ?. 8hat is the name of the group that has much of the responsibility for setting

financial standards

a. ublic &ompanies $ccounting 6versight 1oardb. 7inancial $ccounting 5tandards 1oard

c. 5ecurities and /xchange &ommission

d. None of the above

LLLLL A. $ business may be organized as a:

a. &orporationb. 5ole proprietorship

c. artnership

d. $ny of the above

LLLLL G. $ repayment of the principal of loans to creditors would be shown on the

statement of cash flows as a(n:

a. 6perating activityb. )nvesting activity

c. 7inancing activity

d. Fevenue activity

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LLLLL E. /very business transaction is made up of:

a. Fesources

b. $gentsc. /vents

d. $ll of the above

LLLLL K. The balance sheet contains information about:a. Fevenues and expenses

b. &ash inflows and outflows

c. $ssets, liabilities, and e"uityd. $ll of the above

LLLLL M. The income statement provides information about:a. The financial position of the company at a point in time

b. The financial position of the company for a period of time

c. The amount of cash generated by operationsd. The performance of the company for a period of time

LLLLL'. 8hich of the following financial statements reports the financial position of a

companya. The statement of cash flows

b. The statement of changes in owners! e"uity

c. The balance sheetd. The income statement

S!)# =)> - &8%T)# 1 ? T)-M:T) ;:

accounting bccc syllabus sample

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