Beruflich Dokumente
Kultur Dokumente
Coby Harmon
University of California, Santa Barbara
1-1 Westmont College
1 Accounting in Action
Learning Objectives
1 Identify the activities and users associated with accounting.
records, and
communicates
1-3 LO 1
Three Activities
Illustration 1-1
The activities of the accounting process
1-4 LO 1
Who Uses Accounting Data
INTERNAL
USERS
Illustration 1-2
Questions that internal
users ask
1-5 LO 1
1-6 LO 1
Who Uses Accounting Data
EXTERNAL
USERS
Illustration 1-3
Questions that external
users ask
1-7 LO 1
1 Basic Concepts
4. The two most common types of external users are investors and
company officers.
Solution: 1. True
2. 3. 4. False
5. False False True
1-8 LO 1
LEARNING Explain the building blocks of accounting:
2
OBJECTIVE ethics, principles, and assumptions.
1-9 LO 2
Ethics in Financial Reporting
Illustration 1-4
Steps in analyzing ethics cases
and situations
1-10 LO 2
Ethics in Financial Reporting
Question
Ethics are the standards of conduct by which one's actions
are judged as:
a. right or wrong.
b. honest or dishonest.
c. fair or not fair.
d. all of these options.
1-11 LO 2
1-12 LO 2
Generally Accepted Accounting Principles
Financial Statements
Various users
Balance
Balance Sheet
Sheet
need financial
Income
Income Statement
Statement
Statement
Statement of
of Stockholders’
Stockholders’ Equity
Equity
information
Statement
Statement of
of Cash
Cash Flows
Flows
Note
Note Disclosure
Disclosure
1-13 LO 2
Generally Accepted Accounting Principles
Standard-setting bodies:
► Financial Accounting Standards
Board (FASB)
► Securities and Exchange
Commission (SEC)
► International Accounting Standards
Board (IASB)
1-14 LO 2
1-15 LO 2
Measurement Principles
1-16 LO 2
Assumptions
1-17 LO 2
Forms of Business Ownership
1-18 LO 2
Assumptions
Question
Combining the activities of Kellogg and General Mills
would violate the
a. cost principle.
b. economic entity assumption.
c. monetary unit assumption.
d. ethics principle.
1-19 LO 2
Assumptions
Question
A business organized as a separate legal entity under state
law having ownership divided into shares of stock is a
a. proprietorship.
b. partnership.
c. corporation.
d. sole proprietorship.
1-20 LO 2
1-21
2 Building Blocks of Accounting
1-23 LO 2
LEARNING State the accounting equation, and define
3
OBJECTIVE its components.
Stockholder’s
Assets = Liabilities +
Equity
1-24 LO 3
Basic Accounting Equation
Stockholder’s
Assets = Liabilities +
Equity
Assets
Resources a business owns.
Provide future services or benefits.
Cash, Supplies, Equipment, etc.
1-25 LO 3
Basic Accounting Equation
Stockholder’s
Assets = Liabilities +
Equity
Liabilities
Claims against assets (debts and obligations).
Creditors (party to whom money is owed).
Accounts payable, notes payable, salaries and wages
payable, sales and real estate taxes payable, etc.
1-26 LO 3
Basic Accounting Equation
Stockholder’s
Assets = Liabilities +
Equity
Stockholders’ Equity
Ownership claim on total assets.
Referred to as residual equity.
Common stock and retained earnings.
1-27 LO 3
Stockholders’ Equity
Illustration 1-6
Increases and decreases
Investments by stockholders represent the in stockholders’ equity
1-28 LO 3
Stockholders’ Equity
Illustration 1-6
1-29 LO 3
Stockholders’ Equity
Illustration 1-6
1-30 LO 3
Stockholders’ Equity
Illustration 1-6
1-31 LO 3
3 Stockholders’ Equity Effects
1-32 LO 3
LEARNING Analyze the effects of business
4
OBJECTIVE transactions on the accounting equation.
Analyze
business Journaliz Trial Adjustin
Post
transaction e Balance g Entries
s
Adjusted Financial
Closing Post-Closing
Trial Statement
Entries Trial Balance
Balance s
1-33 LO 4
Transaction Analysis
Record/
Don’t Record
1-34 LO 4
Transaction Analysis
Stockholders’
Assets = Liabilities + Equity
Illustration 1-8
Expanded accounting equation
1-35 LO 4
Transaction Analysis
TRANSACTION 1. INVESTMENT BY STOCKHOLDERS Ray and
Barbara Neal decide to start a smartphone app development company that
they incorporate as Softbyte Inc. On September 1, 2019, they invest
$15,000 cash in the business in exchange for $15,000 of common stock.
The common stock indicates the ownership interest that the Neals have in
Softbyte Inc. This transaction results in an equal increase in both assets
and stockholders’ equity. Illustration 1-9
1. +15,000 +15,000
1-36 LO 4
TRANSACTION 2. PURCHASE OF EQUIPMENT FOR CASH Softbyte
Inc. purchases computer equipment for $7,000 cash.
Illustration 1-9
1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-37 LO 4
TRANSACTION 3. PURCHASE OF SUPPLIES ON CREDIT Softbyte Inc.
purchases for $1,600 headsets and other accessories expected to last
several months. The supplier allows Softbyte to pay this bill in October.
Illustration 1-9 Assets = Liabilities + Stockholders’ Equity
Trans- Accounts Accounts Common Retained Earnings
Cash + + Supplies + Equipment = + +
action Receivable Payable Stock Rev. – Exp. – Div.
1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-38 LO 4
TRANSACTION 4. SERVICES PERFORMED FOR CASH Softbyte Inc.
receives $1,200 cash from customers for app development services it has
performed. Illustration 1-9
1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-39 LO 4
TRANSACTION 5. PURCHASE OF ADVERTISING ON CREDIT Softbyte
Inc. receives a bill for $250 from the Daily News for advertising on its
online website but postpones payment until a later date. Illustration 1-9
1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-40 LO 4
TRANSACTION 6. SERVICES PROVIDED FOR CASH AND CREDIT.
Softbyte provides $3,500 of services. The company receives cash of
$1,500 from customers, and it bills the balance of $2,000 on account.
Illustration 1-9 Assets = Liabilities + Stockholders’ Equity
Trans- Accounts Accounts Common Retained Earnings
Cash + + Supplies + Equipment = + +
action Receivable Payable Stock Rev. – Exp. – Div.
1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-41 LO 4
TRANSACTION 7. PAYMENT OF EXPENSES Softbyte Inc. pays the
following expenses in cash for September: office rent $600, salaries and
wages of employees $900, and utilities $200. Illustration 1-9
1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-42 LO 4
TRANSACTION 8. PAYMENT OF ACCOUNTS PAYABLE Softbyte Inc.
pays its $250 Daily News bill in cash. The company previously (in
Transaction 5) recorded the bill as an increase in Accounts Payable.
Illustration 1-9 Assets = Liabilities + Stockholders’ Equity
Trans- Accounts Accounts Common Retained Earnings
Cash + + Supplies + Equipment = + +
action Receivable Payable Stock Rev. – Exp. – Div.
1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-43 LO 4
TRANSACTION 9. RECEIPT OF CASH ON ACCOUNT Softbyte Inc.
receives $600 in cash from customers who had been billed for services
(in Transaction 6). Illustration 1-9
1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-44 LO 4
TRANSACTION 10. DIVIDENDS The corporation pays a dividend of
$1,300 in cash to Ray and Barbara Neal, the stockholders of Softbyte Inc.
Illustration 1-9
Assets = Liabilities + Stockholders’ Equity
Trans- Accounts Accounts Common Retained Earnings
Cash + + Supplies + Equipment = + +
action Receivable Payable Stock Rev. – Exp. – Div.
1. +15,000 +15,000
2. -7,000 +7,000
3. +1,600 +1,600
4. +1,200 +1,200
5. +250 -250
6. +1,500 +2,000 +3,500
7. -1,700 -600
-900
-200
8. -250 -250
9. +600 -600
10. -1,300 -1,300
$8,050 + $1,400 + $1,600 + $7,000 = $1,600 + $15,000 + $4,700 - $1,950 - $1,300
1-46 LO 4
4 Tabular Analysis
1-47 LO 4
4 Tabular Analysis
2. +7,000 +7,000
3. +8,000 +8,000
4. -850 -850
5. -1,000 -1,000
$18,050 $18,050
1-48 LO 4
4 Tabular Analysis
2. +7,000 +7,000
3. +8,000 +8,000
4. -850 -850
5. -1,000 -1,000
$18,050 $18,050
1-49 LO 4
4 Tabular Analysis
2. +7,000 +7,000
3. +8,000 +8,000
4. -850 -850
5. -1,000 -1,000
$18,050 $18,050
1-50 LO 4
4 Tabular Analysis
2. +7,000 +7,000
3. +8,000 +8,000
4. -850 -850
5. -1,000 -1,000
$18,050 $18,050
1-51 LO 4
4 Tabular Analysis
2. +7,000 +7,000
3. +8,000 +8,000
4. -850 -850
5. -1,000 -1,000
$38,150 $38,150
1-52 LO 4
LEARNING Describe the four financial statements
5
OBJECTIVE and how they are prepared.
Retained Statement
Income Balance
Earnings of Cash
Statement Sheet
Statement Flows
1-53 LO 5
Financial Statements
Question
Net income will result during a time period when:
a. assets exceed liabilities.
b. assets exceed revenues.
c. expenses exceed revenues.
d. revenues exceed expenses.
1-54 LO 5
Net income is needed to determine the
Financial Statements ending balance in retained earnings.
Illustration 1-10
Financial statements and
their interrelationships
1-55 LO 5
Balance in retained earnings
is needed in preparing the
balance sheet.
Illustration 1-10
1-56 LO 5
Financial
Statements
Illustration 1-10
1-57
Income Statement
1-58 LO 5
Retained Earnings Statement
1-59 LO 5
Balance Sheet
1-60 LO 5
Statement of Cash Flows
1-61 LO 5
Financial Statements
Question
Which of the following financial statements is prepared as
of a specific date?
a. Balance sheet.
b. Income statement.
c. Retained earnings statement.
d. Statement of cash flows.
1-62 LO 5
1-63 LO 5
5 Financial Statement Items
1-64 LO 5
5 Financial Statement Items
1-65 LO 5
5 Financial Statement Items
1-66 LO 5
LEARNING APPENDIX 1A: Explain the career
6
OBJECTIVE opportunities in accounting.
1-67 LO 6
“Show Me the Money”
1-68 LO 6
LEARNING Describe the impact of international accounting
OBJECTIVE
7
standards on U.S. financial reporting.
Key Points
Similarities
The basic techniques for recording business transactions are the
same for U.S. and international companies.
Both international and U.S. accounting standards emphasize
transparency in financial reporting. Both sets of standards are
primarily driven by meeting the needs of investors and creditors.
The three most common forms of business organizations,
proprietorships, partnerships, and corporations, are also found in
countries that use international accounting standards.
1-69 LO 7
Key Points
Differences
International standards are referred to as International Financial
Reporting Standards (IFRS), developed by the International
Accounting Standards Board. Accounting standards in the United
States are referred to as generally accepted accounting principles
(GAAP) and are developed by the Financial Accounting Standards
Board.
IFRS tends to be simpler in its accounting and disclosure
requirements; some people say it is more “principles-based.” GAAP
is more detailed; some people say it is more “rules-based.”
1-70 LO 7
Key Points
Differences
The internal control standards applicable to Sarbanes-Oxley (SOX)
apply only to large public companies listed on U.S. exchanges. There
is continuing debate as to whether non-U.S. companies should have
to comply with this extra layer of regulation.
1-71 LO 7
A Look at IFRS
1-72 LO 7
A Look at IFRS
1-73 LO 7
A Look at IFRS
1-74 LO 7
Copyright
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1-75