POA_En_ch018884.pptx
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1、1-11-2Chapter 1Accounting in ActionLearning ObjectivesAfter studying this chapter,you should be able to:1.Explain what balance sheet and income statement are.2.Explain what accounting is.3.Identify the users and uses of accounting.4.Identify the major branches of accounting.5.State the accounting eq
2、uation,and define its components.6.Analyze the effects of business transactions on the accounting equation.7.Understand the four financial statements and how they are prepared.8.Understand why ethics is a fundamental business concept.1-3Chapter 1Accounting in ActionLearning ObjectivesAfter studying
3、this chapter,you should be able to:9.Explain accounting standards-setters and their standards.10.Explain measurement principles.11.Explain the four accounting assumption.12.Explain the three forms of business organization.13.Explain the mechanism that ensures the usefulness of accounting information
4、.14.Explain what to learn in financial accounting course.1-4Preview of Chapter 1ACCOUNTING IN ACTION Your own balance sheet A companys balance sheet and income statement Three activities Who use accounting data?Major branches of accountingWhat is Accounting?Assets Liabilities EquityThe Basic Account
5、ing Equation Transaction AnalysisUsing the Accounting Equation Income Statement Statement of financial position Statement of changes equity Statement of cash flowsFinancial StatementsBeginning Stories Ethics in Financial Reporting Accounting Standards Measurement Principles Assumptions Other issuesB
6、uilding Blocks of Accounting1-5Prepare your own balance sheet.uList all your personal properties uIdentify where the capital comes fromuCombine the two lists into one table,you get your balance sheet.Beginning StoriesLO 1 Explain what balance sheet and income statement are.1-6uPrepare a companys bal
7、ance sheet and income statement.Set up a new company,prepare its balance sheetDo business till the 1st month ends.Prepare the balance sheet at the end of the 1st month.Prepare an income statement for the 1st month.Beginning StoriesLO 1 Explain what balance sheet and income statement are.1-7uThink it
8、 overWhat information does a balance sheet give?What information does an income statement give?Beginning StoriesLO 1 Explain what balance sheet and income statement are.1-8LO 2 Explain what accounting is.Accounting consists of three basic activities-ituidentifies the economic events of an organizati
9、on uRecords the events,and ucommunicates summarized information about the events to interested users,via financial reports.What is Accounting?1-9Three ActivitiesIllustration 1-1The activities of the accounting processThe accounting process includes the bookkeeping function.What is Accounting?LO 2 Ex
10、plain what accounting is.1-10ManagementHuman ResourcesTaxing AuthoritiesLabor UnionsRegulatory AgenciesMarketingFinanceInvestorsCreditorsCustomersInternal UsersExternal UsersWho Uses Accounting DataLO 3 Identify the users and uses of accounting.1-11Common Questions AskedCommon Questions AskedUser1.C
11、an we afford to give our employees a pay raise?Human Resources2.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?
12、InvestorsManagementFinanceMarketingCreditorsWho Uses Accounting DataLO 3 Identify the users and uses of accounting.1-12u Management Accounting focuses on how to provide accounting information to inside users.u Financial Accounting focuses on how to provide accounting information to outside users.u A
13、uditing focuses on how to attest the fairness of companies financial statements.u Principles of Accounting is a fundamental course of financial accounting.Branches of AccountingLO 4 Identify the major branch of accounting.1-13AssetsAssetsLiabilitiesLiabilitiesEquityEquity=+Provides the underlying fr
14、amework for recording and summarizing economic events.Applies to all economic entities regardless of size.The Basic Accounting EquationLO 5 State the accounting equation,and define its components.1-14AssetsAssetsuResources a business owns or controls.uProvide future services or benefits.uCash,Invent
15、ory,Equipment,etc.AssetsLiabilitiesLiabilitiesEquityEquity=+LO 5 State the accounting equation,and define its components.The Basic Accounting Equation1-15LiabilitiesAssetsAssetsLiabilitiesLiabilities=+EquityEquityLO 5 State the accounting equation,and define its components.The Basic Accounting Equat
16、ionuClaims against assets(debts and obligations).uCreditors-party to whom money is owed.uAccounts payable,Notes payable,etc.1-16uOwnership claim on total assets.uReferred to as residual equity.uShare capital-ordinary and retained earnings.EquityAssetsAssetsLiabilitiesLiabilitiesEquityEquity=+LO 5 St
17、ate the accounting equation,and define its components.The Basic Accounting Equation1-17Revenues result from business activities entered into for the purpose of earning income.Generally results from selling merchandise,performing services,renting property,and lending money.Illustration 1-7LO 5 State
18、the accounting equation,and define its components.The Basic Accounting Equation1-18Expenses are the cost of assets consumed or services used in the process of earning revenue.Common expenses are salaries expense,rent expense,interest expense,property tax expense,etc.Illustration 1-7LO 5 State the ac
19、counting equation,and define its components.The Basic Accounting Equation1-19Dividends are the distribution of cash or other assets to shareholders.uReduce retained earningsuNot an expenseIllustration 1-7LO 5 State the accounting equation,and define its components.The Basic Accounting Equation1-20Cl
20、assificationClassify the following items as issuance of shares,dividends,revenues,or expenses.Then indicate whether each item increases or decreases equity.1.Rent expense2.Service revenue3.Dividends4.Salaries expenseLO 5 State the accounting equation,and define its components.Effect on EquityExpense
21、DecreaseRevenueIncreaseEquityDecreaseExpenseDecrease1-21Transactions are a businesss economic events recorded by accountants.uMay be external or internal.uNot all activities represent transactions.uEach transaction has a dual effect on the accounting equation.LO 6 Analyze the effects of business tra
22、nsactions on the accounting equation.Using the Accounting Equation1-22Illustration:Are the following events recorded in the accounting records?EventPurchase computer.CriterionIs the financial position(assets,liabilities,or equity)of the company changed?Discuss product design with customer.Pay rent.R
23、ecord/Dont RecordLO 6 Analyze the effects of business transactions on the accounting equation.Using the Accounting EquationIllustration 1-81-23LO 6 Analyze the effects of business transactions on the accounting equation.Using the Accounting EquationIllustration 1-9Expanded accounting equationTransac
24、tion Analysis1-24LO 6Transaction AnalysisTransaction(1).Investment by Shareholders.Ray and Barbara Neal decides to open a computer programming service which he names Softbyte.On September 1,2014,they invest 15,000 cash in exchange for 15,000 of ordinary shares.Illustration 1-101-25LO 6Transaction An
25、alysisIllustration 1-10Transaction(2).Purchase of Equipment for Cash.Softbyte purchases computer equipment for 7,000 cash.1-26LO 6Transaction AnalysisIllustration 1-10Transaction(3).Purchase of Supplies on Credit.Softbyte purchases for 1,600 from Acme Supply Company computer paper and other supplies
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