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Spring 2010 Fundamentals of Business Information Systems
INTRODUCTION TO
ACCOUNTING
Accounting Defined
Process that aids in business decision making by





business transactions and interpreting their effects
on the business.
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The accounting of a lemonade stand
Keeping records
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Keeping records
A Balanced Scorecard
What We Have Who Owns It
Cash
Total Total
Cash
Total Total
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Accounting Equation


Time to buy supplies
World Class Lemonade
Lemons 25
Sugar 2.5 pounds
Water 1 gallon
Yield 30 cups
Price List
Lemons 20 each
Sugar $2 for 5 pound bag
Assets Liabilities
Cash
Owner's Equity
Total Total
A balance sheet is a snapshot in time and changes frequently.
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Types of Accounting
Financial accounting--preparation and presentation
of financial reports showing business cash flow,
profit/financial performance and financial
position.
Cost accounting--focuses on recording, defining,
and reporting costs associated with specific
operating functions
Cost accounting our current operation
_____________ / _______________ = ____________
$___ / _____ = $_____ per cup
"Cost per unit" is typically referred to as "unit cost".
World Class Lemonade
Lemons 25
Sugar 2.5 pounds
Water 1 gallon
Yield 30 cups
Price List
Lemons 20 each
Sugar $2 for 5 pound bag
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Setting our price
Many considerations in setting price, but above
all






You sold 50 cups of lemonade on day one!
Lemonade
50 per glass
Income Statement
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End of Day One
Before day one:
After day one:
Assets Liabilities
Cash
Owner's Equity
Total Total
Assets Liabilities
Cash
Owner's Equity
Total Total
Day TwoNew Reality
The glasses you used: Mom had to wash. From now on
she's going to charge $2 a day for rental.
Your neighbor has a corner lot and offers to let you set
your stand up therefor $2 a day rental. And you
also have to pay their son $1 a day to help out.
All of the above are ________ (not COGS) that we have
to pay each day.

You go back to the store and buy $12 more inventory.
Sales on day 2 are at the same price but this time
you sell 60 cups.
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End of Day TwoIncome Statement
End of Day TwoBalance Sheet
After day one:
After day two:
Assets Liabilities
Cash
Owner's Equity
Total Total
Assets Liabilities
Cash
Owner's Equity
Total Total
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Expanded Income Statement Format
End of day 2 questions
How often did our balance sheet change?
Does the balance sheet show how much we sold?
Does the balance sheet tell us our COGS?
Does the balance sheet tell us our inventory?
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Primary two financial accounting documents
Balance Sheet
Operating Statement, Profit and Loss (P&L Statement), or Income Statement
Sales COGS = Gross Profit Gross Profit Expenses = Net Profit
Financial Accounting
Accounting focused on the reporting of the financial
position of the organization.
How would information gathered in the previous
financial document help us in decision making?
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SAP
Details on Assets
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Details on Liabilities and Equity