1、Chapter 1,Introduction to Accounting and Business,Accounting, 23st Edition Warren Reeve Fess,PowerPoint Presentation by Douglas Cloud Professor Emeritus of Accounting Pepperdine University,Manufacturing Business,Types of Businesses,Merchandising Business,Types of Businesses,Service Business,Types of
2、 Businesses,There are three types of business organizations,Proprietorship Partnership Corporation,A proprietorship is owned by one individual.,Advantages Ease in organizing Low cost of organizing,Disadvantage Limited source of financial resources Unlimited liability,Joes,A partnership is owned by t
3、wo or more individuals.,Advantages More financial resources than a proprietorship. Additional management skills.,Disadvantage Unlimited liability.,Joe and Martys,A corporation is organized under state or federal statutes as a separate legal entity.,Advantage The ability to obtain large amounts of re
4、sources by issuing stocks.,Disadvantage Double taxation.,J & M, Inc.,A business stakeholder is a person or entity having an interest in the economic performance of the business.,Business Stakeholders,The Process of Providing Information,Accounting Information System,The Process of Providing Informat
5、ion,Accounting Information System,The Process of Providing Information,Generally Accepted Accounting Principles (GAAP),The business entity concept limits the economic data in the accounting system to data related directly to the activities of the business.,The cost concept is the basis for entering
6、the exchange price, or cost of an acquisition in the accounting records.,The objectivity concept requires that the accounting records and reports be based upon objective evidence.,The unit-of-measure concept requires that economic data be recorded in dollars.,The Accounting Equation,Assets = Liabili
7、ties + Owners Equity,The resources owned by a business,The Accounting Equation,Assets = Liabilities + Owners Equity,The rights of the creditors, which represent debts of the business,The Accounting Equation,Assets = Liabilities + Owners Equity,The rights of the owners,What is a business transaction?
8、,A business transaction is an economic event or condition that directly changes an entitys financial condition or directly affects its results of operations.,On November 1, 2005, Chris Clark begins a business that will be known as NetSolutions.,a. Chris Clark deposits $25,000 in a bank account in th
9、e name of NetSolutions.,b. NetSolutions exchanged $20,000 for land.,Chris Clark, Capital 25,000,Cash + Land25,000,Bal.,Assets,Owners Equity,=,=,b. 20,000 +20,000,Accounts Chris Clark, Cash + Supplies + Land Payable Capital,Assets,c. During the month, NetSolutions purchased supplies for $1,350 and ag
10、reed to pay the supplier in the near future (on account).,OwnersLiabilities + Equity,=,Bal. 5,000 20,000 25,000,c. + 1,350 + 1,350,=,d. NetSolutions provided services to customers, earning fees of $7,500 and received the amount in cash.,d. + 7,500 + 7,500,Accounts Chris Clark, Cash + Supplies + Land
11、 Payable Capital,Assets,OwnersLiabilities + Equity,Bal. 5,000 1,350 20,000 1,350 25,000,Fees earned,=,=,Accounts Chris Clark, Cash + Supplies + Land Payable Capital,Assets,e. NetSolutions paid the following expenses: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275.,OwnersLiabilit
12、ies + Equity,=,Bal. 12,500 1,350 20,000 1,350 32,500,=,Accounts Chris Clark, Cash + Supplies + Land Payable Capital,Assets,f. NetSolutions paid $950 to creditors during the month.,OwnersLiabilities + Equity,=,Bal. 8,850 1,350 20,000 1,350 28,850,f. 950 950,=,Accounts Chris Clark, Cash + Supplies + L
13、and Payable Capital,Assets,g. At the end of the month, the cost of supplies on hand is $550, so $800 of supplies were used.,OwnersLiabilities + Equity,=,Bal. 7,900 1,350 20,000 400 28,850,g. 800 800,=,Supplies expense,Accounts Chris Clark, Cash + Supplies + Land Payable Capital,Assets,h. At the end
14、of the month, Chris withdrew $2,000 in cash from the business for personal use.,OwnersLiabilities + Equity,Bal. 7,900 550 20,000 400 28,050,h. 2,000 2,000,With-drawal,=,=,Owners Equity,Effects of Transactions on Owners Equity,Accounting reports, called financial statements, provide summarized inform
15、ation to the owner.,Financial 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, a
16、nd owners equity as of a specific date. Statement of cash flowsA summary of the cash receipts and disbursements for a specific period of time.,Fees earned,$7 500 00,Operating expenses:,Rent expense,$2 125 00,Wages expense,800 00,Supplies expense,450 00,Utilities expense,275 00,Miscellaneous expense,
17、Total operating expenses,1 135 00,NetSolutions Income Statement For the Month Ended November 30, 2005,800 00,Net income $3 050 00,To the statement of owners equity,Chris Clark, capital, November 1, 2005,$ 0,NetSolutions Statement of Owners Equity For the Month Ended November 30, 2005,Less withdrawal
18、s 2 000 00 Increase in owners equity 26 050 00 Chris Clark, capital, November 30, 2005 $26 050 00,From the income statement,To the balance sheet,Assets Liabilities,NetSolutions Balance Sheet November 30, 2005,Cash $ 5 900 00 Accounts Payable $ 400 00 Supplies 550 00 Owners Equity Land 20 000 00 Chri
19、s Clark, cap. 26 050 00Total liabilities and Total assets $26 450 00 owners equity $26 450 00,From the statement of owners equity,This balance sheet presented using the account form,When the balance sheet displays the liabilities and owners equity below the assets, the report form is being used.,Cas
20、h flows from operating activities:Cash received from customers $ 7 500 00Deduct cash payments for expensesand payments to creditors 4 600 00Net cash flow from operating activities 2 900 00 Cash flows from investing activities:Cash payment for acquisition of land (20 000 00 Cash flows from financing
21、activities:Cash received as owners investment $25 000 00Deduct cash withdrawal by owner 2 000 00Net cash flow from financing activities 23 000 00 Net cash flow and Nov. 30, 2005 cash bal. $ 5 900 00,NetSolutions Statement of Cash Flows For the Month Ended November 30, 2005,Should match Cash on the b
22、alance sheet,),Statement of Cash Flows,Cash Flows from Operating ActivitiesThis section reports a summary of cash receipts and cash payments from operations.,Cash Flows from Investing ActivitiesThis section reports the cash transactions for the acquisition and sale of relatively permanent assets.,Cash Flows from Financing ActivitiesThis section reports the cash transactions related to cash investments by the owner, borrowings, and cash withdrawals by the owner.,The End,Chapter 1,
