REFERENCES

Dyson,'J.'R.,'&'Franklin,'E.'(2017).'Accounting)for)Non-
Accounting)Students)(9th'ed.).'Pearson'Education.

Harrison,'W.T.,'Horngren,'C.T.,'&'Thomas,'B.'(2010).'
Financial'Accounting:'International'Financial'Reporting'
Standards'Edition'(8th'ed.).'Pearson'Education.

Kieso,'D.'E.,'Weygandt,'J.'J.,'&'Warfield,'T.'D.'(201$).'
Intermediate)Accounting:)IFRS (2nd'ed.).'John'Wiley'&'Sons.

Weygandt,'J.'J.,'Kieso,'D.'E.,'&'Kimmel,'P.'D.'(2015).'
Financial)Accounting:)IFRS (3rd'ed.).'John'Wiley'&'Sons.

What+Is+Accounting? What+Is+Accounting?
Accounting is' Accounting is'
an'information'system
a service'
that'provides'reports'
provided'for'those'who'need'
to'users'
information
about'the'economic'activities'
and'condition'of'a'business
about'an'entity’s'financial'
and'help'users'in'making'decisions'
performance,
about'organizations its'assets'and'its'liabilities

What+Is+Accounting? A-a-a-a-h! counting! is that what accounting is all about?

so how many sheep do you count in this flock?
The'activities'of'the'accounting'process

Accounting is full of judgements and not as

straightforward as you may think!
What+Is+Accounting? Why+Is+Accounting+Important?
Accounting'is'the'“language+of+business”'
Accounting'is'the'means'by'which'businesses’'financial'
information'is'communicated'to'users
ACCOUNTING+
The'accounting'process' The'better'you'understand'the'language,' the'better'you'can'
=
includes manage'your'finances'as'well'as'those'of'your'business.
the'bookkeeping'function.
BOOK@KEEPING

Who+Uses+Accounting+Data? Who+Uses+Accounting+Data?
External+ • There'is'two'kinds'of'accounting' :
Users
Internal+ – Financial'Accounting':'for'external'users
Users Human+ Taxing+
Resources Authorities – Management'Accounting':'for'internal'users
Labor+
Unions
Finance • Accounting'is'used'in'every'type'of'business
Management Customers – Proprietorship':'single'owner
Creditors – Partnership':'two'or'more'owner
– Corporation':'owned'by'shareholders
Marketing Regulatory+
Agencies
Investors

Accounting+Standards Conventional+accounting+rules+
Historically….
• GAAP'(Generally'Accepted'Accounting'Principles)
Nowadays….
• IFRS'(International'Financial'Reporting'Standards)
• IAS'(International'Accounting'Standards)
In'Indonesia….
• SAK'yang'dikonvergensi'dengan'IFRS
• ETAP
• Syariah
• SAP'(Standar'Akuntansi'Pemerintahan)
Assumptions Conventional+accounting+rules+
• MONETARY UNIT ASSUMPTION
• requires that companies include in the
• accounting records only transaction data that
• can be expressed in terms 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
the entity rule:
! Corporation separation of business and private affairs

Timing+Issues Fiscal+and+Calendar+Years
Accountants divide the economic life of a business into artificial ! Monthly and quarterly time periods are called interim periods.
time periods (Time Period Assumption). ! Most large companies must prepare both quarterly and annual
financial statements.

.. .. . ! Fiscal Year = Accounting time period that is one year in

Jan. Feb. Mar. Apr. Dec.
length.
! Calendar Year = January 1 to December 31.

! Generally a month, a quarter, or a year.

! Also known as the “Periodicity Assumption”

LO 1 LO 1

Measurement+Principles Conventional+accounting+rules+
• HISTORICAL COST PRINCIPLE (or cost principle) dictates
that companies record assets at their cost.

• FAIR VALUE PRINCIPLE states that assets and liabilities

should be reported at fair value (the price received to sell an
asset or settle a liability).

the matching rule

Accounting+History Flow+Of+Accounting+Data
Circa 3500 BC
1458
Accounting'in'Ancient' 1494
Mesopotamia,'Egypt,' Benedetto'Cotrugli'wrote'
China,'Greece,'Rome Delia) Mercatura)et)del) Luca'Bartolomes Pacioli
Mercante)Perfetto,'which' published' his'book,'
included' a'brief'chapter' Summa)de)Arithmetica,)
describing' many'of'the' Geometria,)Proportioni
features'of'double'entry. et)Proportionalita,'which'
covered'bookbkeeping
19 th Century
The'development'of'Accounting' 18 th Century
Boards'and'Standards:
The'industrial'revolution' spurred'the'need'
Securities'and'Exchange' for'more'advanced'cost'accounting'system.'
Commission'(SEC)'in'1934,'
Generally'Accepted'Accounting' The'rising'public'status'of'accountants'
Principles' (GAAP)'in'1939,' transformed'accounting'into'a'profession.'
Financial'Accounting'Standards' The'standardized'test'for'accountants,'
Board'(FASB)'in'1973 CPAs,'were'licensed'first'in'1896.

Transactions Transactions
Illustration: Are' the'following' events' recorded' in' the' accounting' records?
Transactions are+a+business’s+economic+events+recorded+
by+accountants. Discuss'
Purchase' product'
Event
computer. Pay'rent.
!May+be+external+ or+internal. design'with'
customer.
!Not+all+activities+represent+transactions.
Criterion Is'the'financial'position'(assets,'liabilities,'or'
!Each+transaction+has+a+dual+effect+on+the+accounting+ equity)'of'the'company'changed?

equation.
Record/++Don’t+
Record

Double+Entry+Book@keeping Account
An'account+ is'the'record'of'all'the'changes'in'a'
• Every'transaction'has'two' particular'asset,'liability,'or'shareholders''equity'
sides: during'a'period
– You'give'something
– You'receive'something Assets':'Cash,'Accounts'Receivable,'Notes'Receivable,'
Inventory,'Prepaid'Expense,'Land,'Buildings,'Equipment

• In'accounting'we'always'record' Liability':'Account'Payable,'Notes'Payable,'Accrued'
both'sides'of'a'transaction.' Liabilities
Shareholders’'Equity':'Share'Capital,'Retained'Earning,'
Dividends,'Revenues,'Expenses
Each'transaction'has'a'dual+effect on'the'accounting'
equation.
The+Basic+Accounting+Equation The+Basic+Accounting+Equation

(Assets)
=+++ (Liabilities)
+++ (Stockholders’
Equity)
(Assets)
=+++ (Liabilities)
+++ (Stockholders’
Equity)

Economic' Sources'of'Financing'for'Economic'
Resources Resources Assets
Liabilities:' From' Creditors
Stockholders’' Equity:' From' Stockholders Resources'a'business'owns

Provides'the'underlying+framework+for'recording'and' as'a'result'of'past'events
summarizing'economic'events. Provide'future'services'or'benefits.
Cash,'Inventory,'Equipment,'etc.
Applies'to'all'economic'entities'regardless'of'size.

The+Basic+Accounting+Equation The+Basic+Accounting+Equation

(Assets)
=+++ (Liabilities)
+++ (Stockholders’
Equity)
(Assets)
=+++ (Liabilities)
+++ (Stockholders’
Equity)

Liabilities Equity
Claims'against'assets'(debts'and'obligations). Ownership'claim'on'total'assets.
Creditors'b party'to'whom'money'is'owed. Referred'to'as'residual'equity.
Shown'before'equity'in'accounting'equation Share'capital'and'retained'earnings.
Accounts'payable,'Notes'payable,'etc.

The+Basic+Accounting+Equation Accounting+For+Business+Transaction
Transaction+1
Gray'and'a'few'friends'invest'$50,000' to'open'Shine'Brite Car'
Wash.'The'business'issues'ordinary'share'capital'to'the'
shareholders.
 Accounting+For+Business+Transaction Rules+of+Debit+and+Credit
Transaction+2 Every'business'transaction'involves'both'a'debit'and'a'
Shine'Brite purchases'land'for'a'new'location'and'pays'cash'of' credit.'
$40,000. The'total'debits'and'credits'for'every'business'transaction'
must'be'equal.'
This'is'the'cornerstone'of'the'Double'Entry'Accounting'
System.
An'account'can'be'represented'by'the'letter'T.'We'call'
them'Tbaccounts.

Rules+of+Debit+and+Credit Rules+of+Debit+and+Credit
• Remember'that:
• A'debit'increases'an'asset'account.
• A'credit'decreases'an'asset.

• Liabilities'and'shareholders''equity'are'the'opposite:
• A'credit'increases'a'liability,'as'well'as'a'shareholders''equity'
account.
• A'debit'decreases'a'liability,'as'well'as'a'shareholders''equity'
account.

• Dividends'and'Expense'accounts'are'exceptions'to'the'rule'
because'they'are'increased'by'a'debit'(negative'or'contra'equity'
accounts).'

• The'side'of'the'account'where'increases'(debit'or'credit)'is'
called'the'NORMAL+BALANCE+ OF+AN+ ACCOUNT.

Debits and Credits Debits and Credits

If the sum of Debit entries are greater than the sum of If the sum of Credit entries are greater than the sum of
Credit entries, the account will have a debit balance. Debit entries, the account will have a credit balance.

Account'Name Account'Name
Debit'/'Dr.' Credit'/'Cr.' Debit'/'Dr.' Credit'/'Cr.'

Transaction #1 $10,000 $3,000 Transaction #2 Transaction #1 $10,000 $3,000 Transaction #2

Transaction #3 8,000 8,000 Transaction #3

Balance $15,000 Balance $1,000

LO 2
 Debits and Credits Summary Debits and Credits Summary
Liabilities
Debit(/(Dr.( Credit(/(Cr.(
Normal Normal Statement of Financial Position
Balance Balance
Debit
Income Statement
Credit Normal(Balance

Chapter(
3*24
Asset = Liability + Equity Revenue - Expense
Assets Equity
Debit(/(Dr.( Credit(/(Cr.( Debit(/(Dr.( Credit(/(Cr.(

Debit
Normal(Balance Normal(Balance

Chapter( Chapter(
3*23 3*25
Revenue
Expense
Debit(/(Dr.( Credit(/(Cr.(
Debit(/(Dr.( Credit(/(Cr.(

Credit
Normal(Balance
Normal(Balance

Chapter(
3*26
Chapter(
3*27

Recording+Transactions Recording+Transactions
• Accountants'use'a'chronological'record'of'transactions' Transaction+ 1
called'a'journal or'a'general'journal. Gray' and' a'few' friends' invest' $50,000' to'open' Shine' Brite Car' Wash.' The'
business' issues' ordinary' share' capital' to'the'shareholders.
• The'journalizing'process'follows'three'steps:
1. Specify' each' account' affected' by'the' transaction' and' classify' each' Step+ 1+The' business' receives' cash' and' issues' shares.' Cash' and' Share'
account' by' type'(asset,' liability,' shareholders'' equity,' revenue,' or' Capital' are' affected.' Cash' is'an' asset,' and' Share' Capital' is' equity
expense). Step+ 2 Both' Cash' and' Share' Capital' increase.' Debit' Cash' to' record' an'
2. Determine' whether' each' account' is' increased' or' decreased' by' the' increase' in' this'asset.' Credit' Share' Capital' to' record' an' increase' in'
transaction.' Use' the' rules' of'debit' and' credit' to'increase' or'decrease' this' equity' account.'
each' account. Step+ 3 Journalize' The+date+of+the+
the'transaction' as' follows:
3. Record' the' transaction' in' the'journal,' including' a'brief' explanation.' transaction
The' debit' side' is'entered' on' the'left'margin,' and' the' credit' side' is'
indented' to'the' right.

Recording+Transactions Recording+Transactions
Transaction+ 1 Transaction+ 1
Gray' and' a'few' friends' invest' $50,000' to'open' Shine' Brite Car' Wash.' The' Gray' and' a'few' friends' invest' $50,000' to'open' Shine' Brite Car' Wash.' The'
business' issues' ordinary' share' capital' to'the'shareholders. business' issues' ordinary' share' capital' to'the'shareholders.

Step+ 1+The' business' receives' cash' and' issues' shares.' Cash' and' Share'
Capital' are' affected.' Cash' is'an' asset,' and' Share' Capital' is' equity
Step+ 2 Both' Cash' and' Share' Capital' increase.' Debit' Cash' to' record' an'
increase' in' this'asset.' Credit' Share' Capital' to' record' an' increase' in'
this' equity' account.'
Step+ 3 Journalize' the'transaction' as' follows:
The+debit+account
Step+ 1+The' business' receives' cash' and' issues' shares.' Cash' and' Share'
Capital' are' affected.' Cash' is'an' asset,' and' Share' Capital' is' equity
Step+ 2 Both' Cash' and' Share' Capital' increase.' Debit' Cash' to' record' an'
increase' in' this'asset.' Credit' Share' Capital' to' record' an' increase' in'
this' equity' account.'
Step+ 3 Journalize' the'transaction' as' follows:
The+credit+account
 Recording+Transactions Posting+From+Journal+To+Ledger
Transaction+ 1 • The'ledger'is'a'grouping'of'all'the'Tbaccounts'with'their'
Gray' and' a'few' friends' invest' $50,000' to'open' Shine' Brite Car' Wash.' The' balances
business' issues' ordinary' share' capital' to'the'shareholders.
• A'process'to'copy'the'data'from'journal'into'the'ledger'is'
called'posting.
Step+ 1+The' business' receives' cash' and' issues' shares.' Cash' and' Share'
Capital' are' affected.' Cash' is'an' asset,' and' Share' Capital' is' equity • In'most'accounting'systems,'the'ledger'is'computerized.
Step+ 2 Both' Cash' and' Share' Capital' increase.' Debit' Cash' to' record' an'
increase' in' this'asset.' Credit' Share' Capital' to' record' an' increase' in'
this' equity' account.'
Step+ 3 Journalize' the'transaction' as' follows:

A+brief+explanation+
of+the+transaction

Journal+Entry+and+Posting Journal+ Entry+and+Posting

Transaction+ 1 Transaction+1
Gray'and'a'few'friends'invest'$50,000' to'open'Shine'Brite Car'
Wash.'The'business'issues'ordinary'share'capital'to'the'
shareholders.

• The'amount'remaining'in'an'account'is'called'its'balance.)
• This)first)transaction)gives'Cash'a'$50,000' debit'balance'
and'Share'Capital'a'$50,000' credit'balance

Journal+ Entry+and+Posting Journal+Entry+and+Posting

Transaction+2 Shine'Brite Car'Wash's'Ledger'Accounts'After'Posting
Shine'Brite purchases'land'for'a'new'location'and'pays'cash'of'
$40,000.
Accounting+Cycle The+Trial+Balance
• A'trial'balance'lists'all'accounts'with'their'balancesbassets'first,'
then'liabilities'and'shareholders''equity,'to'shows'whether'total'
debits'equal'total'credits.'
• A'trial'balance'may'be'constructed'at'any'time,'but'the'most'
common'time'is'at'the'end'of'the'period.

Thank+You!