1、Yu-wan Huang 黄玉婉 Location: School of Economics, Technology building, level 6, room 605.科技楼605室,Course Coordinator,TEACHING AND LEARNING ARRANGEMENTS,Lectures: Discussion of main body knowledge presented in textbook. a course review/examination preparation session will be held in week 16.Tutorials: D
2、iscussion of the review questions and problems.,Required Resources,Textbook Financial Calculator： Strongly recommended!,Assessment Summary,Class participation Tutorial questions Mid-test Assignment Final exam,Accounting In Action,Financial Accounting, Sixth Edition,Chapter 1,Explain what accounting
3、is. Identify the users and uses of accounting. Understand why ethics is a fundamental business concept. Explain generally accepted accounting principles and the cost principle. Explain the monetary unit assumption and the economic entity assumption. State the accounting equation, and define assets,
4、liabilities, and stockholders equity. Analyze the effects of business transactions on the accounting equation. Understand the four financial statements and how they are prepared.,Study Objectives,Accounting in Action,Ethics in financial reporting Generally accepted accounting principles Assumptions,
5、What is Accounting?,The Building Blocks of Accounting,The Basic Accounting Equation,Using the Basic Accounting Equation,Financial Statements,Three activities Who uses accounting data,Assets Liabilities Stockholders equity,Transaction analysis Summary of transactions,Income statement Statement of ret
6、ained earnings Balance sheet Statement of cash flows,What is Accounting?,SO 1 Explain what accounting is.,The purpose of accounting is to: identify, record, and communicate the economic events of an organization to interested users.,Three Activities,What is Accounting?,SO 1 Explain what accounting i
7、s.,Illustration 1-1 Accounting process,The accounting process includes the bookkeeping function.,Management,Common Questions,Human Resources,IRS,Labor Unions,SEC,Marketing,Finance,Investors,Creditors,Who Uses Accounting Data?,SO 2 Identify the users and uses of accounting.,Customers,Internal Users,E
8、xternal Users,Common Questions Asked,User,1. Can we afford to give our employees a pay raise?,Human Resources,2. Did the company earn a satisfactory income?,3. Should any product lines be eliminated?,4. Is cash sufficient to pay dividends to the stockholders?,5. What price for our product will maxim
9、ize net income?,Who Uses Accounting Data?,SO 2 Identify the users and uses of accounting.,6. Will the company be able to pay its short-term debts?,Investors,Management,Finance,Marketing,Creditors,Discussion Question,SO 3 Understand why ethics is a fundamental business concept.,Q1. “Accounting is ing
10、rained in our society and it is vital to our economic system.” Do you agree? Explain.See notes page for discussion,Who Uses Accounting Data?,The Building Blocks of Accounting,Ethics In Financial Reporting,SO 3 Understand why ethics is a fundamental business concept.,Standards of conduct by which one
11、s actions are judged as right or wrong, honest or dishonest, fair or not fair, are Ethics. Recent financial scandals include: Enron, WorldCom, HealthSouth, AIG, and others. Congress passed Sarbanes-Oxley Act of 2002. Effective financial reporting depends on sound ethical behavior.,Ethics are the sta
12、ndards of conduct by which ones actions are judged as: right or wrong. honest or dishonest. fair or not fair. all of these options.,Review Question,Ethics,SO 3 Understand why ethics is a fundamental business concept.,Various users need financial information,The accounting profession has attempted to
13、 develop a set of standards that are generally accepted and universally practiced.,Financial Statements Balance Sheet Income Statement Retained Earnings Statement Statement of Cash Flows Note Disclosure,Generally Accepted Accounting Principles (GAAP),The Building Blocks of Accounting,SO 4 Explain ge
14、nerally accepted accounting principles and the cost principle.,Organizations Involved in Standard Setting: Securities and Exchange Commission (SEC)Financial Accounting Standards Board (FASB)International Accounting Standards Board (IASB),SO 4 Explain generally accepted accounting principles and the
15、cost principle.,The Building Blocks of Accounting,http:/www.fasb.org/,http:/www.sec.gov/,http:/www.iasb.org/,Cost 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, wherea
16、s market value is often subjective. Fair value information may be more useful.,The Building Blocks of Accounting,SO 4 Explain generally accepted accounting principles and the cost principle.,Monetary Unit Assumption include in the accounting records only transaction data that can be expressed in ter
17、ms 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.,Assumptions,SO 5 Explain the monetary unit assumption and the economic entity assum
18、ption.,Forms of Business Ownership,Proprietorship,Partnership,Corporation,Owned by two or more persons. Often retail and service-type businesses Generally unlimited personal liability Partnership agreement,Ownership divided into shares of stock Separate legal entity organized under state corporation
19、 law Limited liability,Forms of Business Ownership,Generally owned by one person. Often small service-type businesses Owner receives any profits, suffers any losses, and is personally liable for all debts.,SO 5 Explain the monetary unit assumption and the economic entity assumption.,Combining the ac
20、tivities of Kellogg and General Mills would violate the cost principle. economic entity assumption. monetary unit assumption. ethics principle.,Assumptions,SO 5 Explain the monetary unit assumption and the economic entity assumption.,Review Question,A business organized as a separate legal entity un
21、der state law having ownership divided into shares of stock is a proprietorship. partnership. corporation. sole proprietorship.,SO 5 Explain the monetary unit assumption and the economic entity assumption.,Forms of Business Ownership,Review Question,Assets,Liabilities,Stockholders Equity,=,+,Provide
22、s the underlying framework for recording and summarizing economic events. Assets are claimed by either creditors or owners. Claims of creditors must be paid before ownership claims.,The Basic Accounting Equation,SO 6 State the accounting equation, and define assets, liabilities, and stockholders equ
23、ity.,Provides the underlying framework for recording and summarizing economic events.,The Basic Accounting Equation,Resources a business owns. Provide future services or benefits. Cash, Supplies, Equipment, etc.,Assets,Assets,Liabilities,Stockholders Equity,=,+,SO 6 State the accounting equation, an
24、d define assets, liabilities, and stockholders equity.,Provides the underlying framework for recording and summarizing economic events.,The Basic Accounting Equation,Claims against assets (debts and obligations). Creditors - party to whom money is owed. Accounts payable, Notes payable, etc.,Liabilit
25、ies,Assets,Liabilities,Stockholders Equity,=,+,SO 6 State the accounting equation, and define assets, liabilities, and stockholders equity.,Provides the underlying framework for recording and summarizing economic events.,The Basic Accounting Equation,Ownership claim on total assets. Referred to as r
26、esidual equity. Paid-in Capital, Retained Earnings (Corporation).,Stockholders Equity,Assets,Liabilities,Stockholders Equity,=,+,SO 6 State the accounting equation, and define assets, liabilities, and stockholders equity.,Stockholders Equity,Revenues result from business activities entered into for
27、the purpose of earning income. Common sources of revenue are: sales, fees, services, commissions, interest, dividends, royalties, and rent.,Illustration 1-6,SO 6 State the accounting equation, and define assets, liabilities, and stockholders equity.,Expenses are the cost of assets consumed or servic
28、es used in the process of earning revenue. Common expenses are: salaries expense, rent expense, utilities expense, tax expense, etc.,Stockholders Equity,Illustration 1-6,SO 6 State the accounting equation, and define assets, liabilities, and stockholders equity.,Dividends are the distribution of cas
29、h or other assets to stockholders. Dividends reduce retained earnings, however dividends are not an expense.,Stockholders Equity,Illustration 1-6,SO 6 State the accounting equation, and define assets, liabilities, and stockholders equity.,Using The Basic Accounting Equation,Transactions are a busine
30、sss economic events recorded by accountants. May be external or internal. Not all activities represent transactions. Each transaction has a dual effect on the accounting equation.,SO 7 Analyze the effects of business transactions on the accounting equation.,Question: Are the following events recorde
31、d in the accounting records?,Event,Supplies are purchased on account.,Criterion,Is the financial position (assets, liabilities, or stockholders equity) of the company changed?,SO 7 Analyze the effects of business transactions on the accounting equation.,An employee is hired.,Dividends are paid to st
32、ockholders.,Record/ Dont Record,Transactions,Discussion Question,Q18. In February 2008, Paula King invested an additional $10,000 in Hardy Company. Hardys accountant, Lance Jones, recorded this receipt as an increase in cash and revenues. Is this treatment appropriate? Why or why not?See notes page
33、for discussion,Transactions,SO 7 Analyze the effects of business transactions on the accounting equation.,Stockholders Equity,P1-1A: Barones Repair Shop was started on May. Prepare a tabular analysis of the following transactions for the month of May.,Transactions (Problem),+10,000,1.,+10,000,Cash,A
34、ccounts Receivable,Equipment,Accounts Payable,Common Stock,SO 7 Analyze the effects of business transactions on the accounting equation.,+,+,=,+,1. Stockholders invested $10,000 cash to start the repair shop.,Investment,Assets,Liabilities,Transactions (Problem),+10,000,1.,+10,000,SO 7 Analyze the ef
35、fects of business transactions on the accounting equation.,2. Purchased equipment for $5,000 cash.,-5,000,2.,+5,000,Investment,Stockholders Equity,Cash,Accounts Receivable,Equipment,Accounts Payable,Common Stock,+,+,=,+,Assets,Liabilities,Transactions (Problem),+10,000,1.,+10,000,SO 7 Analyze the ef
36、fects of business transactions on the accounting equation.,3. Paid $400 cash for May office rent.,-5,000,2.,+5,000,-400,3.,-400,Stockholders Equity,Cash,Accounts Receivable,Equipment,Accounts Payable,Common Stock,+,+,=,+,Assets,Liabilities,Retained Earnings,Expense,+,Transactions (Problem),+10,000,1
37、.,+10,000,SO 7 Analyze the effects of business transactions on the accounting equation.,-5,000,2.,+5,000,-400,3.,-400,Stockholders Equity,Cash,Accounts Receivable,Equipment,Accounts Payable,Common Stock,+,+,=,+,Assets,Liabilities,Retained Earnings,+5,100,4.,+5,100,4. Received $5,100 from customers f
38、or repair service.,Revenue,+,Transactions (Problem),+10,000,1.,+10,000,SO 7 Analyze the effects of business transactions on the accounting equation.,-5,000,2.,+5,000,-400,3.,-400,Stockholders Equity,Cash,Accounts Receivable,Equipment,Accounts Payable,Common Stock,+,+,=,+,Assets,Liabilities,Retained
39、Earnings,+5,100,4.,+5,100,5. Paid dividends of $1,000 cash.,-1,000,5.,-1,000,+,Transactions (Problem),+10,000,1.,+10,000,SO 7 Analyze the effects of business transactions on the accounting equation.,-5,000,2.,+5,000,-400,3.,-400,Stockholders Equity,Cash,Accounts Receivable,Equipment,Accounts Payable
40、,Common Stock,+,+,=,+,Assets,Liabilities,Retained Earnings,+5,100,4.,+5,100,-1,000,5.,-1,000,6. Paid part-time employee salaries of $2,000.,-2,000,6.,-2,000,Expense,+,Transactions (Problem),+10,000,1.,+10,000,SO 7 Analyze the effects of business transactions on the accounting equation.,-5,000,2.,+5,
41、000,-400,3.,-400,Stockholders Equity,Cash,Accounts Receivable,Equipment,Accounts Payable,Common Stock,+,+,=,+,Assets,Liabilities,Retained Earnings,+5,100,4.,+5,100,-1,000,5.,-1,000,-2,000,6.,-2,000,Expense,7. Incurred $250 of advertising costs, on account.,+250,-250,7.,+,Transactions (Problem),+10,0
42、00,1.,+10,000,SO 7 Analyze the effects of business transactions on the accounting equation.,-5,000,2.,+5,000,-400,3.,-400,Stockholders Equity,Cash,Accounts Receivable,Equipment,Accounts Payable,Common Stock,+,+,=,+,Assets,Liabilities,Retained Earnings,+5,100,4.,+5,100,-1,000,5.,-1,000,-2,000,6.,-2,0
43、00,Revenue,+250,-250,7.,8. Provided repair services on account to customers $750.,+750,8.,+750,+,6,820 + 630 + 5,000 = 250 + 10,000 + 2,200,Transactions (Problem),+10,000,1.,+10,000,SO 7 Analyze the effects of business transactions on the accounting equation.,-5,000,2.,+5,000,-400,3.,-400,Stockholde
44、rs Equity,Cash,Accounts Receivable,Equipment,Accounts Payable,Common Stock,+,+,=,+,Assets,Liabilities,Retained Earnings,+5,100,4.,+5,100,-1,000,5.,-1,000,-2,000,6.,-2,000,+250,-250,7.,+750,8.,+750,9. Collected $120 cash for services previously billed.,+120,9.,-120,+,Companies prepare four financial
45、statements from the summarized accounting data:,Balance Sheet,Income Statement,Statement of Cash Flows,Retained Earnings Statement,Financial Statements,SO 8 Understand the four financial statements and how they are prepared.,Income Statement,Financial Statements,SO 8 Understand the four financial st
46、atements and how they are prepared.,Reports the revenues and expenses for a specific period of time. Net income revenues exceed expenses. Net loss expenses exceed revenues.,Net income will result during a time period when: assets exceed liabilities. assets exceed revenues. expenses exceed revenues.
47、revenues exceed expenses.,Financial Statements,SO 8 Understand the four financial statements and how they are prepared.,Review Question,Income Statement,Financial Statements,SO 8 Understand the four financial statements and how they are prepared.,Retained Earnings Statement,Net income is needed to d
48、etermine the ending balance in retained earnings.,Financial Statements,SO 8 Understand the four financial statements and how they are prepared.,Retained Earnings Statement,Statement indicates the reasons why retained earnings has increased or decreased during the period.,Financial Statements,SO 8 Un
49、derstand the four financial statements and how they are prepared.,Balance Sheet,Retained Earnings Statement,The ending balance in retained earnings is needed in preparing the balance sheet.,Financial Statements,SO 8 Understand the four financial statements and how they are prepared.,Reports the assets, liabilities, and stockholders equity at a specific date. Assets listed at the top, followed by liabilities and stockholders equity. Total assets must equal total liabilities and stockholders equity.,
