Introduction to accounting acctba1 part 1 05282013

Introduction to accounting acctba1 part 1 05282013

• 1.
  29 May 2013
• 2.
   Income Statement Statement of Changes in Owner‟s Equity  Statement of Financial Position (Balance Sheet)  Statement of Cash Flows  Notes to Financial Statements
• 3.
   Accounting isan information system that identifies, records and communicates the economic events of an entity to interested users.  Accounting is often referred to as the „language of business‟.
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   Identifying –recognition or nonrecognition of business activities as “accountable events” ◦ Business transactions ◦ Personal transactions ◦ Neither business nor personal transactions  Measuring (Recording) – assigning of peso amounts to the accountable economic transactions  Communicating – preparing financial statements and interpreting the results
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   Internal Users- users whose decisions affect the internal affairs of the entity ◦ Marketing Managers ◦ Production Supervisors ◦ Chief Financial Officers ◦ Other employees  External Users – users whose decisions concern their financial relationship with the entity ◦ Investors ◦ Creditors (suppliers and bankers)
• 6.
   Luca Pacioli– “father of double-entry bookkeeping”  Summa de arithmetica, geometria, proportione et proportionalite (Everything about arithmetic, geometry, proportions and proportionality)  Described a system to ensure that financial information was recorded efficiently and accurately
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   General management– All general managers need to understand accounting data in order to make wise business decisions  Marketing – Marketing people must be sensitive to costs and benefits, which accounting helps them quantify and understand.  Finance – Finance functions regularly examine and analyse financial statements.  Real Estate – Agents must understand the financial implications of making a sale.
• 8.
   As toownership ◦ Sole Proprietorship – owned by one person ◦ Partnership – owned by two or more persons associated as partners ◦ Corporation – a business whose capital is divided into shares of stock Advantages:  Limited liability of stockholders  Greater source of capital  Longer period of existence
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   As tonature of operations ◦ Service business – renders services to clients or customers for a fee Example:  Medical clinics  Accounting and auditing firms  Schools  Security and janitorial agencies  Beauty Salons
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   As tonature of operations ◦ Merchandising business – one which buys goods from suppliers with the aim of selling these goods at a higher price Example:  Convenience store  Bookstore  Office and school supplies
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   As tonature of operations ◦ Manufacturing business – the manufacturer actually produces the goods that it sells to customers Example:  Manufacturer of consumer goods  Manufacturer of computer hardware products  Manufacturer of food and beverages
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   The operatingcycle of a business is the average time that is required to go from cash to cash in producing revenue.
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   Service business CASH SERVICE RENDEREDON ACCOUNT ACCOUNT COLLECTED
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   Merchandising business CASH MERCHANDISE PURCHASED MERCHANDISE SOLDON ACCOUNT ACCOUNT COLLECTED
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   Manufacturing business CASH RAWMATERIALS PURCHASED RAW MATERIALS PROCESSED INTO FINISHED PRODUCTS FINISHED GOODS SOLD ON ACCOUNT ACCOUNT COLLECTED