kieso chapter 1 slide

Download Kieso chapter 1 slide

Post on 26-Oct-2014

125 views

Category:

Documents

9 download

Embed Size (px)

TRANSCRIPT

Slide 1-1

Chapter

1

Accounting in ActionFinancial Accounting, IFRS Edition Weygandt Kimmel KiesoSlide 1-2

Study Objectives Study Objectives1. 2. 3. 4. 5.

Explain what accounting is. Identify the users and uses of accounting. Understand why ethics is a fundamental business concept. Explain accounting standards and the measurement principles. Explain the monetary unit assumption and the economic entity assumption. State the accounting equation, and define its components. Analyze the effects of business transactions on the accounting equation. Understand the four financial statements and how they are prepared.

6. 7.

8.

Slide 1-3

Accounting in Action Accounting in Action

What is Accounting? Three activities Who uses accounting data?

The Building Blocks of Accounting Ethics in financial reporting Accounting standards Assumptions

The Basic Accounting Equation Assets Liabilities Equity

Using the Accounting Equation Transaction analysis Summary of transactions

Financial Statements Income statement Retained earnings statement Statement of financial position Statement of cash flows

Slide 1-4

What is Accounting? What is Accounting?The purpose of accounting:(1)

to identify, record, and communicate the economic identify record events of an

(2) (3)

organization to interested users.

Slide 1-5

SO 1 Explain what accounting is.

What is Accounting? What is Accounting?Three ActivitiesIllustration 1-1 The activities of the accounting process

The accounting process includes the bookkeeping function.Slide 1-6

SO 1 Explain what accounting is.

What is Accounting? What is Accounting?Who Uses Accounting DataInternal UsersFinance Management Customers Creditors Marketing Regulatory Agencies Human Resources Taxing Authorities

External UsersLabor Unions

Investors

Slide 1-7

SO 2 Identify the users and uses of accounting.

What is Accounting? What is Accounting?Common Questions Asked1. Can we afford to give our employees a pay raise? 2. Did the company earn a satisfactory income? 3. 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?Slide 1-8

User Human Resources Investors Management Finance Marketing CreditorsSO 2 Identify the users and uses of accounting.

The Building Blocks of Accounting The Building Blocks of AccountingEthics In Financial ReportingStandards of conduct by which ones actions are judged as right or wrong, honest or dishonest, fair or not fair, are Ethics.Recent financial scandals include: Enron (USA), Parmalat (ITA), Satyam Computer Services (IND), AIG (USA), and others. Effective financial reporting depends on sound ethical behavior.Slide 1-9

SO 3 Understand why ethics is a fundamental business concept.

The Building Blocks of Accounting The Building Blocks of AccountingEthics In Financial Reporting

Slide 1-10

SO 3 Understand why ethics is a fundamental business concept.

The Building Blocks of Accounting The Building Blocks of Accounting

Review QuestionEthics are the standards of conduct by which one's actions are judged as: a. right or wrong. b. honest or dishonest. c. fair or not fair. d. all of these options.

Slide 1-11

Solution on notes page

SO 3 Understand why ethics is a fundamental business concept.

The Building Blocks of Accounting The Building Blocks of AccountingAccounting StandardsInternational Accounting Standards Board (IASB)http://www.iasb.org/ International Financial Reporting Standards (IFRS)

Financial Accounting Standards Board (FASB)http://www.fasb.org/ Generally Accepted Accounting Principles (GAAP)

Slide 1-12

SO 4 Explain accounting standards and the measurement principles.

The Building Blocks of Accounting The Building Blocks of AccountingMeasurement PrinciplesCost Principle (Historical) dictates that companies record assets at their cost. Issues:Reported at cost when purchased and also over the time the asset is held. Cost easily verified, market value is often subjective. Fair value information may be more useful.

Slide 1-13

SO 4 Explain accounting standards and the measurement principles.

The Building Blocks of Accounting The Building Blocks of AccountingMeasurement PrinciplesFair Value Principle indicates that assets and liabilities should be reported at fair value.In determining which measurement principle to use, companies weigh the factual nature of cost figures versus the relevance of fair value. Only in situations where assets are actively traded, such as investment securities, is the fair value principle applied.

Slide 1-14

SO 4 Explain accounting standards and the measurement principles.

The Building Blocks of Accounting The Building Blocks of AccountingAssumptionsMonetary Unit Assumption include in the accounting records only transaction data that can be expressed in terms of money. Economic Entity Assumption requires that activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities. Proprietorship. Partnership. Corporation.Slide 1-15

Forms of Business Ownership

SO 5 Explain the monetary unit assumption and the economic entity assumption.

The Building Blocks of Accounting The Building Blocks of AccountingProprietorshipGenerally owned by one person. Often small service-type businesses Owner receives any profits, suffers any losses, and is personally liable for all debts.Slide 1-16

PartnershipOwned by two or more persons. Often retail and service-type businesses Generally unlimited personal liability Partnership agreement

CorporationOwnership divided into shares Separate legal entity organized under state corporation law Limited liability

SO 5 Explain the monetary unit assumption and the economic entity assumption.

The Building Blocks of Accounting The Building Blocks of Accounting

Review QuestionCombining the activities of Kellogg and General Mills would violate the a. cost principle. b. economic entity assumption. c. monetary unit assumption. d. ethics principle.

Slide 1-17

Solution on notes page

SO 5 Explain the monetary unit assumption and the economic entity assumption.

The Building Blocks of Accounting The Building Blocks of Accounting

Review QuestionA business organized as a separate legal entity under state law having ownership divided into shares is a a. proprietorship. b. partnership. c. corporation. d. sole proprietorship.

Slide 1-18

Solution on notes page

SO 5 Explain the monetary unit assumption and the economic entity assumption.

The Building Blocks of Accounting The Building Blocks of AccountingIndicate whether each of the following statements presented below is true or false. 1. The three steps in the accounting process are identification, recording, and communication. 2. The two most common types of external users are investors and company officers. 3. Shareholders in a corporation enjoy limited legal liability as compared to partners in a partnership.

True False True

Slide 1-19

Solution on notes page

SO 5 Explain the monetary unit assumption and the economic entity assumption.

The Building Blocks of Accounting The Building Blocks of AccountingIndicate whether each of the following statements presented below is true or false. 4. The primary accounting standard-setting body outside the United States is the International Accounting Standards Board (IASB). 5. The cost principle dictates that companies record assets at their cost. In later periods, however, the fair value of the asset must be used if fair value is higher than its cost.

True

False

Slide 1-20

Solution on notes page

SO 5 Explain the monetary unit assumption and the economic entity assumption.

Slide 1-21

Answer on notes page

SO 5 Explain the monetary unit assumption and the economic entity assumption.

The Basic Accounting Equation The Basic Accounting EquationAssets = Liabilities + Equity

Provides the underlying framework for recording and summarizing economic events. Applies to all economic entities regardless of size.

Slide 1-22

SO 6

State the accounting equation, and define its components.

The Basic Accounting Equation The Basic Accounting EquationAssets = Liabilities + Equity

Provides the underlying framework for recording and summarizing economic events.

AssetsResources a business owns. Provide future services or benefits. Cash, Inventory, Equipment, etc.Slide 1-23

SO 6

State the accounting equation, and define its components.

The Basic Accounting Equation The Basic Accounting EquationAssets = Liabilities + Equity

Provides the underlying framework for recording and summarizing economic events.

LiabilitiesClaims against assets (debts and obligations). Creditors - party to whom money is owed. Accounts payable, Notes payable, etc.Slide 1-24

SO 6

State the accounting equation, and define its components.

The Basic Accounting Equation The Basic Accounting EquationAssets = Liabilities + Equity

Provides the underlying framework for recording and summarizing economic events.

EquityOwnership claim on total assets. Referred to as residual equity. Share capital and retained earnings.Slide 1-25

SO 6

State the accounting equation, and define its components.

The Basic Accounting Equation The Basic Accounting Equa