You are on page 1of 82

AC 201

Fundamental Accounting


.201
1 2557
..

Robert Libby,
Patricia A. Libby
and Daniel G.
Short,
Financial
Accounting, 7th
edition, McGrawHill, 2011.

Understanding the Business

1. Purchase parts and labor


Machine

Furniture

Ingredient

Staff

2. Manufacture product
Ingredient

Coffee Making Process

Final Product

Understanding the Business

3. Sell products to customers


Customer Order

Coffee Brewing based on Customer Order

Serve/deliver

or

4. Collect cash from customers and pay to creditors

Understanding the Business

Sell products to customers : ?

( )
1) / ?

= /

( )

/
/

Coffee A Co.

2557

Lattes
Cappuciano
Espresso

@ 50 * 600

@ 60 * 500
@ 70 * 200

()
30,000
30,000
14,000
74,000

20,000
30,000
15,000
65,000
9,000

Understanding the Business

Sell products to customers : ?

( )
2) ?
?

( )

2.

Coffee A Co.

2557

()
50,000
30,000
300,000
380,000

30,000
100,000
15,000
145,000
235,000

Understanding the Business


The Role of Accounting in Business ()
)

Operating Activities (

/
/

Staff

Understanding the Business


The Role of Accounting in Business ()
Investing Activities ()

The Role of Accounting in Business ()


Financing Activities ()


Ingredient

(owner)
(investor)

(bank)

?
300,000 * 2 = 600,000
?

(Accounting)

(Accounting Process)


1.

Recording

2.

Classifying

3.

Summarizing

4.

Interpreting

(Bookkeeping)

(Transaction)
Managers
(internal
decision
makers)

Reports
information
to decision
makers

-
-
-

Investors
and
Creditors
(external
decision
makers)

(Financial
Accounting)


(Managerial
Accounting)

(Tax
Accounting)


(Stakeholders)

1.
2.
3.
4.
5.
6.

1.
2.


(The Role of Accounting in Business)

3
-
-
-

(Business Activity)
1. (Financing activities)



2. (Investing activities)


3. (Operating activities)

1.
(Balance Sheet)

2.

(Income Statement)

(Financial
Statement)

3.
(Statement of Change in
Shareholders Equity)

4.
(Cash Flow Statement)

5.

(Accounting Policy and Note


to Financial Statements)

Users of financial statements


Employees
Shareholders/
Investors

Government

Loan providers

Trade creditors

Management

Potential
Investors

Customers

Public

Users Focus on investors


to assess the risk and
return of their
investment in the
company and take
investment decisions
based on their analysis

to assess
the credit worthiness
of a business and
ascertain whether to
supply goods on credit

Employees

Shareholders/
Investors

Trade creditors

Government

Management

to decide whether to
Loan providers
grant a loan or credit to
a business.

Customers

Public
Manager

to manage the affairs of the


company by assessing its financial
performance and position and
taking important business decisions

(Financial Statement)


1.


2.


3.

(Financial Statement)
2
1. (Accrual basis)

2.

(The Going-Concern Principle)




( )
(Statement of Financial Position)

+ ( )

PIZZA AROMA, INC.


Balance Sheet
At September 30, 2010

Assets
Cash
Accounts Receivable
Supplies
Equipment
Total Assets
Liabilities
Accounts Payable
Notes Payable
Total Liabilities
Stockholders' Equity
Contributed Capital
Retained Earnings
Total Stockholders' Equity
Total Liabilities and Stockholders' Equity

$
$

14,000
1,000
3,000
40,000
58,000
7,000
20,000
27,000
30,000
1,000
31,000
58,000

(Assets)
1.
2.
3.


(Asset)


(Current Assets)


(Non Current Assets)

(Liabilities)


(Current Liabilities)

(Non Current
Liabilities)



(Stockholders Equity)

(Capital Stock)

(Retained
Earning)

(Accounts
receivable)

(Shortterm investment)



(Inventories)

- (Prepaid
expenses)
-
(Accrued revenue)



(Tangible assets)


(Intangible assets)

(Liabilities)
1.
2.
3.

(Notes
Payable)

(Accounts
Payable)

1.

2.
3. 12

4.
12

(Accounts payable)



(Notes payable)

(Bank overdrafts)


(Loans)

(Accrued
expenses)



(Long-term liabilities)



(Stockholders Equity)


(Capital Stock)

(Retained
Earnings)

(Shareholders Equity)


=

Contributed
Capital

Stock Certificate

Retained
Earnings

(Income Statement)

PIZZA AROMA, INC.


Income Statement
For the Month Ended September 30, 2010
Revenues
Pizza Revenue
$ 11,000
Total Revenue
11,000
Expenses
Supplies Expense
Wages Expense
Rent Expense
Utilities Expense
Insurance Expense
Advertising Expense
Income Tax Expense
Total Expenses
Net Income

4,000
2,000
1,500
600
300
100
500
9,000
2,000

Revenues

Expenses

Net Income

(Accrual Basis Accounting)




( Cash Basis )




( )


(Accrual Basis Accounting)







(Accrual Basis Accounting)

(Revenue Recognition Principle)

1. (Reward)
(Risk)

2.

(Economic Benefit)

(Revenue Recognition Principle)




Case 1:

Month 1

Case 2:

Month 1

Month 2

Month 2

(Revenue Recognition Principle)




(Matching Principle)
Case 1:

Staff

Month 1

Case 2:

Month 1

Month 2

Month 2

(MATCHING CONCEPT)


:

Month 1

Month 2

(Time Period Concept)


12
31 . 54

1 . 54

Y0

Y1

Y2

Y3

Y4

Y5

1 . 53

31 . 53

12
1 31

(Dividends)

(Retained Earnings)

Beg. B/L of
R/E

Net Income

Dividends

End B/L of R/E

Dividends are not an expense( )


.

(Retained Earnings)

Beg. B/L of
R/E

Net Income

Dividends

End B/L of R/E

Dividends are not an expense( )


.

3
1.
CFO (Cash Flows from Operating Activities

2.

3.

CFI (Cash Flows from Investing Activities)

CFF (Cash Flows from Financing Activities)

(Operating Activities)

....


...
, ,
, ,
,

(Investing Activities)

...
-

(Financing Activities)
...


...
,
,
, ,

The Role of Accounting in Business ()


)

Operating Activities (

Staff

Understanding the Business


The Role of Accounting in Business ()
Investing Activities ()

Understanding the Business


The Role of Accounting in Business ()
Financing Activities ()


Ingredient

(owner)
(investor)

(bank)


(bank)

2
3

Cash Flow from Operating Activities (CFO)

( )

CFO

CFI

CFF

Change in Cash

(Sole Proprietorship)

(SMEs)

(Partnership)

1. (Ordinary Partnership)
-
-

2. (Limited Partnership)
-
-

(Corporation or Limited
Company)


(Dividend)

1. (Private Company
Limited)

2. (Public Company
Limited)

15


(Triple Bottom Line Reporting: TBL)
3

(Environment)
-

(Social)
-

(Economic)
-

Appendix: Companys Financial Statement


and Management Analysis

Value Chain
1

Value Chain

1
2
3

1
2
3
4
5
6
7
8

1
2
3
4
5
6
7

Hotel

1
2
3
4

Hotel

Hotel

Food and Beverage

Food and Beverage

Food and Beverage

2
3