PENGANTAR

AKUNTANSI 1
 1
Introduction to
Accounting and
Business

3
After studying this chapter, you should be able to:

1. Describe the nature of a business and the

role of ethics and accounting in business.
2. Summarize the development of accounting
principles and relate them to practice.
3. State the accounting equation and define
each element of the equation.

4
After studying this chapter, you should be able to:

4. Describe and illustrate how business

transactions can be recorded in terms of the
resulting change in the basic elements of
the accounting equation.
5. Describe the financial statements of a
proprietorship and explain how they
interrelate.

5
 1-1

Objective 1
Describe the nature of a
business and the role of ethics
and accounting in business.

6
 1-1
Types of Businesses

Service Business Service

The Walt Disney Company Entertainment
Delta Air Lines Transportation
Marriott International Hotels Hospitality and
lodging
Bank of America Corporation Financial services
XM Satellite Radio Satellite radio

8
 1-1
Types of Businesses

Merchandising Business Product

Wal-Mart General merchandise
GameStop Corporation Video games and
accessories
Best Buy Consumer electronics
Gap Inc. Apparel
Amazon.com Internet books, music, video

9
 1-1
Types of Businesses

Manufacturing Business Product

General Motors Corp. Cars, trucks, vans
Samsung Cell phones
Dell Inc. Personal computers
Nike Athletic shoes and apparel
The Coca-Cola Company Beverages
Sony Corporation Stereos and televisions

10
 1-1
Common Forms of Business Organizations

 Proprietorship
 Partnership
 Corporation
 Limited liability company

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 1-1

A proprietorship is owned by one

individual and—
 Comprises 70% of business
organizations in the United States.
 Requires low cost of organizing.
 Is limited to financial resources of the
owner.
 Is used by small businesses.

12
 1-1

A partnership is similar to a
proprietorship except that it is owned
by two or more individuals and—
 Comprises 10% of business
organizations in the United States.
 Combines the skills and resources of
more than one person.

13
 1-1

A corporation is organized under state or

federal statues as a separate legal taxable
entity and—
 Generates 90% of the total dollars of
business receipts received.
 Comprises 20% of the businesses.

Continued

14
 1-1

 Includes ownership divided into shares

of stock, sold to shareholders
(stockholders).
 Is able to obtain large amounts of
resources by issuing stock.
 Is used by large businesses.

15
 1-1

A limited liability company (LLC) combines

attributes of a partnership and a
corporation in that it is organized as a
corporation. However, a limited liability
corporation can elect to be taxed as a
partnership and—
 Is a popular alternative to a
partnership.
 Has tax and liability advantages to the
owners.
16
 1-1

A business stakeholder is a
person or entity having an
interest in the economic
performance and well-being
of a business.

17
 1-1

Capital market stakeholders

provide the major financing for the
business in order for the business to
begin and continue its operations.

18
 1-1

Product or service market

stakeholders include customers
who purchase the business’s
products or services as well as
the vendors who supply inputs
to the business.

19
 1-1

Government stakeholders have an

interest in the economic
performance of a business. City,
county, state, and federal
governments collect taxes from
businesses within their
jurisdiction.

20
 1-1

Internal stakeholders include

individuals employed by the
business. Managers have an
incentive to maximize the
economic value of the business.
Employees have an interest
because their jobs depend on it.

21
 1-1

The moral principles that

guide the conduct of
individuals are called ethics.

22
 1-1

The answer to
“What went 1. Individual
character
wrong for these 2. Firm culture
companies?” 3. Laws and
(Exhibit 2) enforcement
involves three
factors.

23
 1-1

Accounting can be defined as an

information system that
provides reports to stakeholders
about the economic activities
and condition of a business.

24
 1-1

The process by which accounting provides

information to business stakeholders is as follows:
 Identify stakeholders.
 Assess stakeholders’ information needs.
 Design the accounting information system to
meet stakeholders’ needs.
 Record economic data about business
activities and events.
 Prepare accounting reports for stakeholders.

25
1-1

23
26
 1-1

Financial accounting is primarily concerned

with the recording and reporting of
economic data and activities for a business.

Managerial accounting uses both financial

accounting and estimated data to aid
management in running day-to-day
operations and in planning future
operations.
27
 1-1

Accountants employed by a business firm or

a not-for-profit organization are said to be
employed in private accounting.

Accountants and their staff who provide

services on a fee basis are said to be
employed in public accounting.

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 1-2

Objective 2

Summarize the development

of accounting principles and
relate them to practice.

29
 1-2

The business entity concept

limits the economic data in
the accounting system to
data related directly to the
activities of the business.

30
 1-2

The cost concept is the

basis for entering the
exchange price, or cost
of an acquisition in the
accounting records.

31
 1-2

The objectivity concept

requires that the
accounting records and
reports be based upon
objective evidence.

32
 1-2

The unit of measure

concept requires that
economic data be
recorded in dollars.

33
 1-2

Example Exercise 1-1

On August 25, Gallatin Repair Service extended an offer of

$125,000 for land that had been priced for sale at $150,000. On
September 3, Gallatin Repair Service accepted the seller’s
counteroffer of $137,000. On October 20, the land was assessed
at a value of $98,000 for property tax purposes. On December 4,
Gallatin Repair Service was offered $160,000 for the land by a
national retail chain. At what value should the land be recorded
in Gallatin Repair Service’s records?
Follow My Example 1-1

$137,000. Under the cost concept, the land should be recorded at

the cost to Gallatin Repair Service.
31

34
 1-3

Objective 3
State the accounting
equation and define each
element of the equation.

35
 1-3
The Accounting Equation

Assets = Liabilities + Owner’s Equity

The resources
owned by a
business

36
 1-3
The Accounting Equation

Assets = Liabilities + Owner’s Equity

The rights of
the creditors,
which represent
debts of the
business

37
 1-3
The Accounting Equation

Assets = Liabilities + Owner’s Equity

The rights of
the owners

38
 1-3

Example Exercise 1-2

John Joos is the owner and operator of You’re A Star, a motivational

consulting
The followingbusiness. At the
accounts end of
appear in its
theaccounting
adjusted period, December
trial balance of 31,
2007, You’re
Hindsight A Star has Indicate
Consulting. assets of whether
$800,000 each
and liabilities
accountofwould
$350,000.
be
Using theinaccounting
reported equation,
the (a) current determine
asset; the following
(b) property, amounts:
plant, and
a. Owner’s(c)equity,
equipment; as of
current December
liability, 31, 2007. liability; or (e)
(d) long-term
b. Owner’s
owner’s equityequity, as of
section ofDecember
the December 31, 2008,
31, assuming that assets
2007, balance sheet
increased
of Hindsight by $130,000 and liabilities decreased by $25,000
Consulting.
during 2008.
Follow My Example 1-2

a. A = L + OE b. A = L + OE
$800,000 = $350,000 + OE $130,000 = –$25,000 + OE
OE = $450,000 OE = $155,000
OE on Dec. 31, 2008:
$605,000 ($450,000 + $155,000) 36
39
 1-4

Objective 4
Describe and illustrate how
business transactions can be
recorded in terms of the resulting
change in the basic elements of the
accounting equation.
40
 1-4

A business transaction is an
economic event or condition
that directly changes an entity’s
financial condition or directly
affects its results of operations.

41
 1-4

On November 1, 2007, Chris

Clark begins a business that will
be known as NetSolutions.

42
 1-4

Assets = Owner’s Equity

Cash
= Chris Clark, Capital
a. 25,000
25,000 Investment
by Chris Clark

a. Chris Clark deposits $25,000 in a bank

account in the name of NetSolutions.
40
43
 1-4

Assets = Owner’s Equity

Cash + Land Chris Clark, Capital
Bal. 25,000 = 25,000
b. –20,000 +20,000
Bal. 5,000 20,000 25,000

b. NetSolutions exchanged $20,000 for land.

41
44
 1-4

Owner’s
Assets = Liabilities + Equity

Accounts Chris Clark,

Cash + Supplies + Land Payable Capital
=
Bal. 5,000 20,000 25,000
c. +1,350 +1,350
Bal. 5,000 1,350 20,000 1,350 25,000

c. During the month, NetSolutions purchased

supplies for $1,350 and agreed to pay the
supplier in the near future (on account). 42
45
 1-4

Beginning with entry (d) the

asset section will be shown
first, then the liabilities and
owner’s equity will be shown in
the following slide.

46
 1-4

Assets

Cash + Supplies + Land

Bal. 5,000 1,350 20,000

d. +7,500
Bal. 12,500 1,350 20,000

d. NetSolutions provided services to

customers, earning fees of $7,500 and
received the amount in cash. 44
47
 1-4

Liabilities + Owner’s Equity

Accounts Chris Clark, Fees
Payable +Capital + Earned

1,350 25,000 Bal.

+7,500 d.
1,350 25,000 7,500 Bal.

d. NetSolutions provided services to

customers, earning fees of $7,500 and
received the amount in cash.
45
48
Expenses 1-4

The amounts used in earning revenue are

called expenses. Adding expenses to the
owner’s equity section results in a space
problem. To adjust for these added
headings, the word “Bal.” has been
omitted from Slides 48, 50, 52, and 54.
The bottom row in these four slides
provides the balances after each
transaction.

49
 1-4

Assets
Cash + Supplies + Land
Bal. 12,500 1,350 20,000
e. –3,650

Bal. 8,850 1,350 20,000

e. NetSolutions paid the following

expenses: wages, $2,125; rent, $800;
utilities, $450; and miscellaneous, $275.
47
50
 1-4

Liabilities + Owner’s Equity

Accounts Chris Clark, Fees Wages Rent Utilities Misc.
Payable + Capital + Earned Expense Expense Expense Expense
1,350 25,000 7,500
–2,125 –800 –450 –275 e.
1,350 25,000 7,500 –2,125 –800 –450 –275

e. NetSolutions paid the following expenses:

wages, $2,125; rent, $800; utilities, $450; and
miscellaneous, $275.
48

51
 1-4

Assets
Cash + Supplies + Land
Bal. 8,850 1,350 20,000
f. –950

Bal. 7,900 1,350 20,000

f. NetSolutions paid $950 to

creditors during the month.
49
52
 1-4

Liabilities + Owner’s Equity

Accounts Chris Clark, Fees Wages Rent Utilities Misc.
Payable + Capital + Earned Expense Expense Expense Expense
1,350 25,000 7,500 –2,125 –800 –450 –275
–950 f.

400 25,000 7,500 –2,125 –800 –450 –275

f. NetSolutions paid $950 to

creditors during the month.
50
53
 1-4

Assets
Cash + Supplies + Land
Bal. 7,900 1,350 20,000
g. –800

Bal. 7,900 550 20,000

g. At the end of the month, the cost

of supplies on hand is $550, so
$800 of supplies were used. 51
54
 1-4

Liabilities + Owner’s Equity

Accounts Chris Clark, Fees Wages Rent Supplies Util. Misc.
Payable + Capital + Earned Exp. Exp. Exp. Exp. Exp.
400 25,000 7,500 –2,125 –800 –450 –275
–800 g.
400 25,000 7,500 –2,125 –800 –800 –450 –275

g. At the end of the month, the cost

of supplies on hand is $550, so
$800 of supplies were used. 52
55
 1-4

Assets
Cash + Supplies + Land
Bal. 7,900 550 20,000
h. –2,000

Bal. 5,900 550 20,000

h. At the end of the month, Chris

withdrew $2,000 in cash from
the business for personal use.
53
56
 1-4

Liabilities + Owner’s Equity

Accounts Chris Clark, Chris Clark Fees Wages Rent Supplies Util. Misc.
Payable + Capital + Drawing Earned Exp. Exp. Exp. Exp. Exp.
400 25,000 7,500 –2,125 –800 –800 –450 –275
–2,000 h.
400 25,000 –2,000 7,500 –2,125 –800 –800 –450 –275

h. At the end of the month, Chris

withdrew $2,000 in cash from
the business for personal use.
54
57
 1-4

Owner’s Equity

Increased by Decreased by

Owner’s investments Owner’s withdrawals

Revenues Expenses

55
58
 1-4

Example Exercise 1-3

Salvo Delivery Service is owned and operated by Joel Salvo. The following
selected transactions were completed by Salvo Delivery Service during
February:

1. Received cash from owner as additional investment, $35,000.

2. Paid creditors on account, $1,800.
3. Billed customers for delivery services on account, $11,250.
4. Received cash from customers on account, $6,740.
5. Paid cash to owners for personal use, $1,000.

Continued 56

59
 1-4

Example Exercise 1-3

Indicate the effect of each transaction on the accounting equation elements

(Assets, Liabilities, Owner’s Equity, Drawing, Revenue, and Expense) by listing
the numbers identifying the transactions, (1) through (5). Also, indicate the
specific item within the accounting equation element that is affected. To
illustrate, the answer to (1) is shown below.

(1) Asset (Cash) increases by $35,000; Owner’s Equity (Joel Salvo, Capital)
increases by $35,000.

57

60
 1-4

Follow My Example 1-3

(2) Asset (Cash) decreases by $1,800; Liability (Accounts Payable) decreases

by $1,800.

(3) Asset (Accounts Receivable) increases by $11,250; Revenue (Delivery

Service Fees) increases by $11,250.
(4) Asset (Cash) increases by $6,740; Asset (Accounts Receivable) decreases
by $6,740.
(5) Asset (Cash) decreases by $1,000; Owner’s Equity (Joel Salvo, Drawing)
increases by $1,000.

For Practice: PE 1-3A, PE 1-3B 58

61
 1-5

Objective 5

Describe the financial

statements of a
proprietorship and explain
how they interrelate.

62
 1-5

Accounting reports, called

financial statements,
provide summarized
information to the owner.

63
 1-5

The income statement is

a summary of the
revenue and expenses for
a specific period of time,
such as a month or a
year.

64
Income Statement 1-5

Net income is
carried to the 62
statement of
owner’s equity 65
 1-5

A statement of owner’s equity

is a summary of the changes
in the owner’s equity that
have occurred during a
specific period of time.

66
Statement of Owner’s Equity 1-5

From the income statement

To the balance sheet

64

67
 1-5

A balance sheet is a list of

the assets, liabilities, and
owner’s equity as of a
specific date.

68
 Balance Sheet 1-5

This amount is compared to the

net cash flow on the statement of From the statement of
cash flows owner’s equity

66

69
 1-5

A statement of cash flows

is a summary of the cash
receipts and payments
for a specific period of
time.

70
Statement of Cash Flows 1-5

This amount should match Cash on the

balance sheet.
68
71
Income Statement 1-5

The income statement reports the

revenues and expenses for a period of
time based on the matching concept.
This concept is applied by matching the
expenses with the revenue generated
during a period by those expenses.

72
 1-5

The excess of revenue over

the expenses is called net
income or net profit. If the
expenses exceed the revenue,
the excess is a net loss.

73
 1-5

Example Exercise 1-4

The assets and liabilities of Chickadee Travel Service at April 30,

2008, the end of the current year, and its revenue and expenses
for the year are listed below. The capital of the owner, Adam
Cellini, was $80,000 at May 1, 2007, the beginning of the current
year.
Accounts payable $ 12,200 Miscellaneous expense $ 12,950
Accounts receivable 31,350 Office expense 63,000
Cash 53,050 Supplies 3,350
Fees earned 263,200 Wages expense 131,700
Land 80,000
Prepare an income statement for the current year ended April
30, 2008.
71

74
 1-5

Follow My Example 1-4

CHICKADEE TRAVEL SERVICE

INCOME STATEMENT
For the Year Ended April 30, 2008
Fees earned $263,200
Expenses:
Wages expense $131,700
Office expense 63,000
Miscellaneous expense 12,950
Total expenses 207,650
Net income $ 55,550

72
For practice: PE 1-4A, PE 1-4B
75
Statement of Owner’s Equity 1-5

The statement of owner’s

equity reports the changes in
the owner’s equity for a period
of time. It is prepared after
the income statement.

76
 1-5

Example Exercise 1-5

Using the data for Chickadee Travel Service shown

in Example Exercise 1-4, prepare a statement of
owner’s equity for the current year ended April 30,
2008. Adam Cellini invested an additional $50,000
in the business during the year and withdrew cash
of $30,000 for personal use.

74

77
 1-5

Follow My Example 1-5

CHICKADEE TRAVEL SERVICE

STATEMENT OF OWNER’S EQUITY
For the Year Ended April 30, 2008
Adam Cellini, capital, May 1, 2007 $ 80,000
Additional investment by owner during year $ 50,000
Net income for the year 55,550
$105,550
Less withdrawals 30,000
Increase in owner’s equity 75,550
Adam Cellini, capital, April 30, 2008 $155,550

75
For Practice: PE 1-5A, PE 1-5B
78
Balance Sheet 1-5

The balance sheet reports

the amounts of a firm’s
assets, liabilities, and
owner’s equity at the end
of a specific period.

79
 1-5

The account form of balance

sheet lists the assets on the left
and the liabilities and owner’s
equity on the right—similar to
design of an account.

80
 1-5

The report form of balance

sheet presents the liabilities
and owner’s equity sections
below the assets section.

81
 1-5

Example Exercise 1-6

Using the data for Chickadee Travel Service shown in Example

Exercise 1-4 and 1-5, prepare the balance sheet as of April 30, 2008.
Follow My Example 1-6

CHICKADEE TRAVEL SERVICE

BALANCE SHEET
April 30, 2008
Assets Liabilities
Cash $ 53,050 Accounts payable $12,200
Accounts receivable 31,350
Supplies 3,350 Owner’s Equity
Land 80,000 Adam Cellini, capital 155,550
Total assets $167,750 Total liab. & owner’s eq. $167,750
For Practice: PE 1-6A, PE 1-6B 79
82
Statement of Cash Flows 1-5

The statement of cash flows

consists of three sections:
(1) Operating activities
(2) Investing activities
(3) Financing activities

83
 1-5

The cash flows from

operating activities section
reports a summary of cash
receipts and cash payments
from operations.

84
 1-5

The cash flows from investing

activities section reports the cash
transactions for the acquisition and
sale of relatively permanent assets.

85
 1-5

The cash flows from financing

activities section reports the
cash transactions related to
cash investments by the owner,
borrowings, and cash
withdrawals by the owner.

86
 1-5
Example Exercise 1-7

A summary of cash flows for Chickadee Travel Service for the year ended April 30,
2008, is shown below.

Cash receipts:
Cash received from customers $251,000
Cash received from additional
investment of owner 50,000
Cash payments:
Cash paid for expenses 210,000
Cash paid for land 80,000
Cash paid to owner for personal use 30,000
The cash balance as of May 1, 2007, was $72,050.

Prepare a statement of cash flows for Chickadee Travel Service for

the year ended April 30. 2008.
84

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 1-5
Follow My Example 1-7

CHICKADEE TRAVEL SERVICE

STATEMENT OF CASH FLOWS
For the Year Ended April 30, 2008
Cash flows from operating activities:
Cash received from customers $251,000
Deduct cash payments for expenses 210,000
Net cash flows from operating activities $ 41,000
Cash flows from investing activities:
Cash payments for purchase of land (80,000)
Cash flows from financing activities:
Cash received from owner as investment $ 50,000
Deduct cash withdrawals by owner 30,000
Net cash flows from financing activities 20,000
Net decrease in cash during year $(19,000)
Cash as of May 1, 2007 72,050
Cash as of April 30, 2008 $ 53,050

85
For Practice: PE 1-7A, PE 1-7B
88
Interrelationships Among Financial Statements 1-5

 The income statement and the statement

of owner’s equity are interrelated.
Net income or net loss
appears on both statements.

89
 1-5

 The statement of owner’s equity

and the balance sheet are
interrelated.
The owner’s capital at the end of
the period on the statement of
owner’s equity also appears on the
balance sheet as owner’s capital.

90
 1-5

 The balance sheet and the statement

of cash flows are interrelated.

The cash on the balance sheet also

appears as the end-of-period cash on
the statement of cash flows.

91
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