Professional Documents
Culture Documents
Accounting in Business
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Winston Kwok, Ph.D., CPA
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
1-2
C1
Importance of Accounting
Accounting
Identifying
Select transactions and events
Recording
Input, measure and classify
Communicating
Prepare, analyze and interpret
1-3
C2
C2
Opportunities in Accounting
C2
1-6
C3
C3
Comparable
Comparable Is helpful in
in contrasting
Information organizations.
1-9
C4
Financial
Financial Accounting
Accounting Standards
Standards Board
Board
is
is the
the private
private group
group that
that sets
sets both
both
broad
broad and
and specific
specific principles.
principles.
C4
International Standards
IASB
1 - 11
C4
Accounting Assumptions
Now Future
Going-Concern Assumption Monetary Unit Assumption
Express transactions and events in
Reflects assumption that the business
monetary, or money, units.
will continue operating instead of being
closed or sold.
C4
Sole
Sole Partnership
Partnership Corporation
Corporation
Proprietorship
Proprietorship
1 - 14
C4
Characteristics of Businesses
Characteristic
Characteristic Proprietorship
Proprietorship Partnership
Partnership Corporation
Corporation
Business
Businessentity
entity yes
yes yes
yes yes
yes
Legal
Legal entity
entity no
no no
no yes
yes
Limited
Limited liability
liability no*
no no
no* yes
yes
Unlimited
Unlimited life
life no
no no
no yes
yes
Business
Businesstaxed
taxed no
no no
no yes
yes
One
One owner
owner allowed
allowed yes
yes no
no yes
yes
C4
Corporation
Accounting Equation
A1
Assets
Cash
Accounts Notes
Receivable Receivable
Resources
owned or
Vehicles controlled by Land
a company
Store Buildings
Supplies
Equipment
1 - 18
A1
Liabilities
Accounts Notes
Payable Payable
Creditors’
claims on
assets
Taxes Wages
Payable Payable
1 - 19
A1
Equity
Owner’s
Claims on
Assets
1 - 20
P1
Assets
Assets = Liabilities
Liabilities + Equity
Equity
1 - 21
P1
P1 Transaction 2: Purchase
Supplies for Cash
Chas Taylor’s company, FastForward
purchases supplies paying $2,500 cash.
The accounts involved are:
(1) Cash (asset)
(2) Supplies (asset)
1 - 23
P1 Transaction 3: Purchase
Equipment for Cash
FastForward purchases equipment for
$26,000 cash.
The accounts involved are:
(1) Cash (asset)
(2) Equipment (asset)
1 - 24
P1 Transaction 4: Purchase
Supplies on Credit
FastForward purchases Supplies of $7,100 on
account.
The accounts involved are:
(1) Supplies (asset)
(2) Accounts Payable (liability)
1 - 25
P1 Transaction 5: Provide
Services for Cash
The company provides consulting services
receiving $4,200 cash.
The accounts involved are:
(1) Cash (asset)
(2) Revenues (equity)
1 - 26
P1
Summary of Transactions
Other transactions were executed during December and the summary of
all transactions is shown below:
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P2
Financial Statements
Let’s prepare the financial statements reflecting the
transactions we have recorded.
• Income statement (Statement of
comprehensive income)
• Statement of changes in equity
• Balance sheet (Statement of financial
position)
• Statement of cash flows
1 - 29
P2
Income Statement
P2
STATEMENT OF CHANGES IN EQUITY
1 - 31
P2
Balance Sheet
The Balance Sheet describes a company’s financial
position at a point in time.
1 - 32
P2
Statement of Cash Flows
1 - 33
A2
Decision Analysis
Return on assets (ROA) is stated in ratio form as
income divided by assets invested.
Net income
Return on assets =
Average total assets
1 - 34
A3
C5
C6 1C - IASB’s Conceptual
Framework for Financial
Reporting
1 - 37
END OF CHAPTER 1