Chapter 01 - Principal Accounting (Warren Reeve Fess)

Download Chapter 01 - Principal Accounting (Warren Reeve Fess)

Post on 14-Nov-2014

597 views

Category:

Education

3 download

Embed Size (px)

DESCRIPTION

Presentation Slide Principal Accounting Warren Reeve Fess Chapter 01

TRANSCRIPT

<ul><li> 1. ChapterChapter 11 Introduction to AccountingIntroduction to Accounting and Businessand Business </li></ul><p> 2. 1. Describe the nature of a business. 2. Describe the role of accounting in business. 3. Describe the importance of business ethics and the basic principles of proper ethical conduct. 4. Describe the profession of accounting. 5. Summarize the development of accounting principles and relate them to practice. 6. State the accounting equation and define each element of the equation. ObjectivesObjectivesObjectivesObjectives After studying thisAfter studying this chapter, you shouldchapter, you should be able to:be able to: After studying thisAfter studying this chapter, you shouldchapter, you should be able to:be able to: 3. 7. Explain how business transactions can be stated in terms of the resulting change in the basic elements of the accounting equation. ObjectivesObjectivesObjectivesObjectives 8. Describe the financial statements of a proprietorship and explain how they interrelate. 9. Use the ratio of liabilities to owners equity to analyze the ability of a business to withstand poor business conditions. 4. STEP ONE ANALYZING LOOKING AT EVENTS THAT HAVE TAKEN PLACE AND THINKING ABOUT HOW THEY AFFECT THE BUSINESS 5. STEP TWO ENTERING FINANCIAL INFORMATION ABOUT EVENTS INTO THE ACCOUNTING SYSTEM RECORDING 6. STEP THREE SORTING AND GROUPING SIMILAR ITEMS TOGETHER CLASSIFYING 7. STEP FOUR BRINGING THE VARIOUS ITEMS OF INFORMATION TOGETHER TO DETERMINE A RESULT SUMMARIZING 8. STEP FIVE TELLING THE RESULTS REPORTING 9. STEP SIX DECIDING THE MEANING AND IMPORTANCE OF THE INFORMATION IN VARIOUS REPORTS INTERPRETING 10. Service BusinessService BusinessService BusinessService Business ProductProductProductProduct Triwasana Entertainment Garuda Indonesia Transportation Hilton Hotels Hospitality and lodging Bank BRI Financial Telkomsel Telecommunication Triwasana Entertainment Garuda Indonesia Transportation Hilton Hotels Hospitality and lodging Bank BRI Financial Telkomsel Telecommunication Types of Businesses 11. Merchandising BusinessMerchandising BusinessMerchandising BusinessMerchandising Business ProductProductProductProduct Matahari General merchandise Toys City Toys Electronic City Consumer electronics Amazon.com Internet books, music, video retailer Matahari General merchandise Toys City Toys Electronic City Consumer electronics Amazon.com Internet books, music, video retailer Types of Businesses 12. Manufacturing BusinessManufacturing BusinessManufacturing BusinessManufacturing Business ProductProductProductProduct Toyota Astra Motor Cars, trucks, vans Intel Computer chips Boeing Jet aircraft Adidas Athletic shoes and apparel Coca-Cola Beverages Polytron Stereos and television Toyota Astra Motor Cars, trucks, vans Intel Computer chips Boeing Jet aircraft Adidas Athletic shoes and apparel Coca-Cola Beverages Polytron Stereos and television Types of Businesses 13. There are three types of business organizations There are three types of business organizations Proprietorship Partnership Corporation 14. A proprietorship is owned by one individual. A proprietorship is owned by one individual. Advantages Ease in organizing Low cost of organizing Disadvantage Limited source of financial resources Unlimited liability Joes 15. A partnership is owned by two or more individuals. A partnership is owned by two or more individuals. Advantages More financial resources than a proprietorship. Additional management skills. Disadvantage Unlimited liability. Joe and Martys 16. A corporation is organized under state or federal statutes as a separate legal entity. A corporation is organized under state or federal statutes as a separate legal entity. Advantage The ability to obtain large amounts of resources by issuing stocks. Disadvantage Double taxation. J &amp; M, Inc. 17. Business StrategiesBusiness StrategiesBusiness StrategiesBusiness Strategies A business strategy is an integrated set of plans and actions designed to enable the business to gain an advantage over its competitors, and in doing so, to maximize its profits. 18. Business StrategiesBusiness StrategiesBusiness StrategiesBusiness Strategies Under a low-cost strategy, a business designs and produces products or services of acceptable quality at a cost lower than that of its competitors. Wal-Mart Southwest Airlines 19. Business StrategiesBusiness StrategiesBusiness StrategiesBusiness Strategies Under a differential strategy, a business designs and produces products or services that possess unique attributes or characteristics which customers are willing to pay a premium price. Maytag Tommy Hilfiger 20. Value Chain of a BusinessValue Chain of a BusinessValue Chain of a BusinessValue Chain of a Business A value chain is the way a business adds value for its customers by processing inputs into product or service. InputsInputs BusinessBusiness ProcessesProcesses Products orProducts or ServicesServices CustomerCustomer ValueValue 21. A business stakeholder is a person or entity having an interest in the economic performance of the business. Business StakeholdersBusiness StakeholdersBusiness StakeholdersBusiness Stakeholders 22. 2 Assess stakeholders informational needs. The Process ofThe Process of Providing InformationProviding Information The Process ofThe Process of Providing InformationProviding Information STAKEHOLDERS Internal: Owners, managers, employees External: Customers, creditors, government 1 Identify stake- holders. 23. Accounting Information System Design the accounting information system to meet stakeholders needs. 34 Record economic data about business activities and events. The Process ofThe Process of Providing InformationProviding Information The Process ofThe Process of Providing InformationProviding Information 24. 5 Prepare accounting reports for stakeholders. STAKEHOLDERS Internal: Owners, managers, employees External: Customers, creditors, government Accounting Information System The Process ofThe Process of Providing InformationProviding Information The Process ofThe Process of Providing InformationProviding Information 25. Business EthicsBusiness EthicsBusiness EthicsBusiness Ethics 1. Avoid small ethical lapses. 2. Focus on your long-term reputation. 3. You may expect to suffer adverse personal consequences for holding to an ethical position. Sound Principles that form the foundation for ethical behavior Sound Principles that form the foundation for ethical behavior 26. Profession of AccountingProfession of AccountingProfession of AccountingProfession of Accounting Accountants employed by a business firm or a not-for-profit organization are said to be engaged in private accounting. Accountants employed by a business firm or a not-for-profit organization are said to be engaged in private accounting. Accountants and their staff who provide services on a fee basis are said to be employed in public accounting. Accountants and their staff who provide services on a fee basis are said to be employed in public accounting. 27. Generally AcceptedGenerally Accepted AccountingAccounting Principles (GAAP)Principles (GAAP) Generally AcceptedGenerally Accepted AccountingAccounting Principles (GAAP)Principles (GAAP) 28. TheThe business entity conceptbusiness entity concept limits the economic data inlimits the economic data in the accounting system tothe accounting system to data related directly to thedata related directly to the activities of the business.activities of the business. TheThe business entity conceptbusiness entity concept limits the economic data inlimits the economic data in the accounting system tothe accounting system to data related directly to thedata related directly to the activities of the business.activities of the business. The cost concept is the basis for entering the exchange price, or cost of an acquisition in the accounting records. The cost concept is the basis for entering the exchange price, or cost of an acquisition in the accounting records. 29. TheThe objectivity conceptobjectivity concept requires that the accountingrequires that the accounting records and reports be basedrecords and reports be based upon objective evidence.upon objective evidence. TheThe objectivity conceptobjectivity concept requires that the accountingrequires that the accounting records and reports be basedrecords and reports be based upon objective evidence.upon objective evidence. The unit-of-measure concept requires that economic data be recorded in dollars. The unit-of-measure concept requires that economic data be recorded in dollars. 30. The Accounting EquationThe Accounting EquationThe Accounting EquationThe Accounting Equation Assets = Liabilities + Owners Equity The resourcesThe resources owned by aowned by a businessbusiness The resourcesThe resources owned by aowned by a businessbusiness 31. The Accounting EquationThe Accounting EquationThe Accounting EquationThe Accounting Equation Assets = Liabilities + Owners Equity The rights of theThe rights of the creditors, whichcreditors, which represent debtsrepresent debts of the businessof the business The rights of theThe rights of the creditors, whichcreditors, which represent debtsrepresent debts of the businessof the business 32. The Accounting EquationThe Accounting EquationThe Accounting EquationThe Accounting Equation Assets = Liabilities + Owners Equity The rights of theThe rights of the ownersowners The rights of theThe rights of the ownersowners 33. What is a business transaction? A business transaction is an economic event or condition that directly changes an entitys financial condition or directly affects its results of operations. 34. On November 1, 2005, Chris Clark begins a business that will be known as NetSolutions. 35. a. Chris Clark deposits $25,000 in a banka. Chris Clark deposits $25,000 in a bank account in the name of NetSolutions.account in the name of NetSolutions. a. Chris Clark deposits $25,000 in a banka. Chris Clark deposits $25,000 in a bank account in the name of NetSolutions.account in the name of NetSolutions. Chris Clark, Capital 25,000 Investment by Chris Clark Cash 25,000a. Assets Owners Equity= = 36. b. NetSolutions exchanged $20,000 for land.b. NetSolutions exchanged $20,000 for land.b. NetSolutions exchanged $20,000 for land.b. NetSolutions exchanged $20,000 for land. Chris Clark, Capital 25,000 Cash + Land 25,000Bal. Assets Owners Equity= = b. 20,000 +20,000 Bal. 5,000 20,000 25,000 37. Accounts Chris Clark, Cash + Supplies + Land Payable Capital Assets c. During the month, NetSolutions purchasedc. During the month, NetSolutions purchased supplies for $1,350 and agreed to pay thesupplies for $1,350 and agreed to pay the supplier in the near future (supplier in the near future (on accounton account).). c. During the month, NetSolutions purchasedc. During the month, NetSolutions purchased supplies for $1,350 and agreed to pay thesupplies for $1,350 and agreed to pay the supplier in the near future (supplier in the near future (on accounton account).). Owners Liabilities + Equity= Bal. 5,000 20,000 25,000 c. + 1,350 + 1,350 Bal. 5,000 1,350 20,000 1,350 25,000 = 38. d. NetSolutions provided services tod. NetSolutions provided services to customers, earning fees of $7,500 andcustomers, earning fees of $7,500 and received the amount in cash.received the amount in cash. d. NetSolutions provided services tod. NetSolutions provided services to customers, earning fees of $7,500 andcustomers, earning fees of $7,500 and received the amount in cash.received the amount in cash. Bal. 12,500 1,350 20,000 1,350 32,500 d. + 7,500 + 7,500 Accounts Chris Clark, Cash + Supplies + Land Payable Capital Assets Owners Liabilities + Equity Bal. 5,000 1,350 20,000 1,350 25,000 Fees earned = = 39. e. 3,650 2,125 800 450 275 Wages Rent Util. Misc. Accounts Chris Clark, Cash + Supplies + Land Payable Capital Assets e. NetSolutions paid the followinge. NetSolutions paid the following expenses: wages, $2,125; rent, $800;expenses: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275.utilities, $450; and miscellaneous, $275. e. NetSolutions paid the followinge. NetSolutions paid the following expenses: wages, $2,125; rent, $800;expenses: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275.utilities, $450; and miscellaneous, $275. Owners Liabilities + Equity= Bal. 12,500 1,350 20,000 1,350 32,500 = Bal.8,850 1,350 20,000 1,350 28,850 40. Accounts Chris Clark, Cash + Supplies + Land Payable Capital Assets f. NetSolutions paid $950 tof. NetSolutions paid $950 to creditors during the month.creditors during the month. f. NetSolutions paid $950 tof. NetSolutions paid $950 to creditors during the month.creditors during the month. Owners Liabilities + Equity= Bal. 8,850 1,350 20,000 1,350 28,850 f. 950 950 = Bal. 7,900 1,350 20,000 400 28,850 41. Accounts Chris Clark, Cash + Supplies + Land Payable Capital Assets g. At the end of the month, the costg. At the end of the month, the cost of supplies on hand is $550, soof supplies on hand is $550, so $800 of supplies were used.$800 of supplies were used. g. At the end of the month, the costg. At the end of the month, the cost of supplies on hand is $550, soof supplies on hand is $550, so $800 of supplies were used.$800 of supplies were used. Owners Liabilities + Equity= Bal. 7,900 1,350 20,000 400 28,850 g. 800 800 = Bal. 7,900 550 20,000 400 28,050 Supplies expense 42. Accounts Chris Clark, Cash + Supplies + Land Payable Capital Assets h. At the end of the month, Chrish. At the end of the month, Chris withdrew $2,000 in cash from thewithdrew $2,000 in cash from the business for personal use.business for personal use. h. At the end of the month, Chrish. At the end of the month, Chris withdrew $2,000 in cash from thewithdrew $2,000 in cash from the business for personal use.business for personal use. Owners Liabilities + Equity Bal. 7,900 550 20,000 400 28,050 h. 2,000 2,000 Bal. 5,900 550 20,000 400 26,050 With- drawal = = 43. Owners withdrawals Expenses Decreased byDecreased by Owners Equity Effects of Transactions on Owners EquityEffects of Transactions on Owners EquityEffects of Transactions on Owners EquityEffects of Transactions on Owners Equity Increased byIncreased by Owners investments Revenues Net income 44. Accounting reports, called financial statements, provide summarized information to the owner. Accounting reports, called financial statements, provide summarized information to the owner. 45. Financial StatementsFinancial StatementsFinancial StatementsFinancial Statements Income statementA summary of the revenue and expenses for a specific period of time. Statement of owners equityA summary of the changes in the owners equity that have occurred during a specific period of time. Balance sheetA list of the assets, liabilities, and owners equity as of a specific date....</p>

Recommended

View more >