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Accounting in business focuses on the process of identifying and starting a new business venture, sourcing and organizing the required resources, and taking both the risk and rewards associated with the venture. Accounting and finance is used to make predictions about the future, make more effective commitments of time energy and money, measure and reassess progress of the business. SFRS in Singapore, and SFRS for SMEs with lesser requirements: to provide relief to small entities from compliance with full SFRS.
Accounting in business focuses on the process of identifying and starting a new business venture, sourcing and organizing the required resources, and taking both the risk and rewards associated with the venture. Accounting and finance is used to make predictions about the future, make more effective commitments of time energy and money, measure and reassess progress of the business. SFRS in Singapore, and SFRS for SMEs with lesser requirements: to provide relief to small entities from compliance with full SFRS.
Accounting in business focuses on the process of identifying and starting a new business venture, sourcing and organizing the required resources, and taking both the risk and rewards associated with the venture. Accounting and finance is used to make predictions about the future, make more effective commitments of time energy and money, measure and reassess progress of the business. SFRS in Singapore, and SFRS for SMEs with lesser requirements: to provide relief to small entities from compliance with full SFRS.
process of identifying & starting a new business venture, sourcing
and organizing the required resources, while taking both the risk and rewards associated with the venture. 5 Stages of Entre: Discovery, Concept Development, Resourcing, Actualization, and Harvesting. Cash Flow Conundrum: the need to pay suppliers before customers pay you. Financing Needs: the amount of control to surrender equity vs debt financing, the amount of financing needed, cost of financing. 3 Reasons to Know Accounting & Finance: Predictions about the future, make more effective commitments of time energy and money, measure and reassess progress of the business Making Predictions: Future revenues, operating expenses and assets. Making Commitments: sales processes, delivery processes. 4 types of commitments: sunken investments in LT fixed assets; promises to pay a fixed amount over time to use fixed assets e.g. rent, salary; borrowing money to expand (ST/LT); making working capital investments (inventory or accounts receivables) Accounting for costs and relating them to activity, CVP analysis. Cash flow projections and analysis will help determine value of different types of commitments. Measuring progress: appropriate incentive compensation, measuring progress helps to highlight bottleneck and problem areas, and spot trends in revenues and costs early. Ethics: Identify ethical concerns analyze options make ethical decision GAAP: Relevant, reliable, and comparable. IASB responsible for issuing IFRS. ASC responsible for formulation and promulgation of accounting standards. Monitoring and enforcement of compliance are done by ACRA. Singapore Standards: SFRS in Singapore, and SFRS for SMEs with lesser requirements: to provide relief to small entities from compliance with full SFRS. Eligibility for SFRS for SMEs: Not publicly accountable, publishes general financial statements for external users, small entity with 2 out of 3 criteria annual revenue <10m, total gross assets <10m, total number of employees <50 Principles of Accounting: Revenue recognition principle (recognize revenue when earned), Cost principle (based on actual cost), matching principle (record expenses to generate revenue), full disclosure principle. Accounting Assumptions: Going concern, monetary unit, business entity (separate), time period (life of company can be divided into time periods) Characteristic of Corporation: legal entity, limited liability, unlimited life, business taxed, one owner allowed
companys financial statements. Disadvantage: cost of
implementation. Depreciation: Straight Line = (Asset Cost Residual Value)/Useful Life. Need to record the CARRYING VALUE of fixed assets.
Worksheet: Benefits: Aids preparation of financial statements,
assists in planning and organizing audit, reduces possibility of errors, helps in preparing interim financial statements, links accounts and their adjustments, shows the effects of proposed transactions Closing Entries: 1. Close credit balance in revenue accounts to income summary 2. Close debit balances in expense accounts to income summary 3. Close income summary account to owners capital 4. Close withdrawals to owners account Summary of Accounting Cycle: Analyze transactions Journalize Post Prepare unadjusted trial balance Adjust Prepare adjusted trial balance Prepare statements Close Prepare post closing trial balance Week 4: Analysis of Financial Statements: Gross profit = Revenue COGS | Income from Operations = Gross Profit other operating expenses (EBIT) Net Income vs Cash Flow: Long run net income is the end game. Two components of net income: operating and non-operating. If operating income > non-operating income indication of better health | Important for business owners to know its net cash flows from operating activities Operating Cash Flow: important for a business to have strong operating cash flow. Operating cash flow is often viewed as a better ongoing measure of a companys financial health. Basics of Financial Statement Analysis: Reduces uncertainty, application of analytical tools, involves transforming data. Helps users make better decisions. Standards for Comparison: compare analysis to benchmarks intra-company, competitors, and industry Week 2: Basic Elements of FA Transaction Analysis guidelines | Tools of Analysis: Horizontal analysis (across time), and Financial Statements: Assets = Liabilities + Equity Vertical analysis (base amount), Ratio Analysis Trend Analysis: (Owner Capital Owner Withdrawals + Revenues Expenses) e.g. 2006 as base year 100%, 2008 130%, 2009 165% Vertical Accounting Cycle: analyze each transaction and event from Analysis: Balance Sheet base amount: Total Assets, Income source documents (employee earnings records, checks paid or statement: Revenues RATIO ANALYSIS: Liquidity and received, bills from suppliers etc) record relevant transactions Efficiency: Net Working Capital = Current Assets Current and events in a journal post journal information to ledger Liabilities (current assets financed from long term capital sources accounts prepare and analyze trial balance Account: record of increases and decreases in a specific asset liability, equity, revenue that do not require near term repayment) Higher values of NWC suggest strong liquidity position and ability to meet current or expense item General ledger: record containing all accounts obligations | Current Ratio: CA/CL (measures short term debt used by the company. Core of business records, record of every paying ability, benchmark of 1) | Acid Test/Quick Ratio: (Cash+ financial transaction, may use subsidiary ledgers as well. Ledger: Short term investments+ Current receivables)/Current Liabilities collection of all accounts for an info system. Chart of Accounts: (similar to current ratio but excludes inventories and prepaid list of all accounts and includes an identifying number for each expenses that may not be as liquid. Accounts Receivable account Double Entry Accounting: DEAL: Debit Expenses Assets Losses, GIRL: Credit: Gains Income Revenue Liabilities Trial Turnover: Net Credit sales/Average accounts receivable (net credit sales = gross sales on credit sales returns, discounts | avg. of beg Balance: 1. List account title and amount 2. Compute total debit A/R and end A/R | measures how many times a company converts and credit balances 3. Prove total debit = credit Statement of its receivables to cash a year) Inventory Turnover: Cash Flow: Financing Activities: provide the means organizations use to pay for resources e.g. land, buildings and equipment to carry COGS/average inventory (measures number of times merchandise out plans. Investing Activities: acquiring and disposing of resources is sold and replaced during the year) Payable Turnover: total