Lo Ppt01

Uses of Accounting Information and the Financial Statements ,[object Object],Chapter 1

Accounting Copyright © Houghton Mifflin Company. All rights reserved. 1– … supplies the information decision makers need to make reasoned choices among alternative uses of scarce resources in the conduct of business and economic activities

Performance Measures ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

Processing Accounting Information ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

Decision Makers ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

Decision Makers (cont’d) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

Management ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

Users With an Indirect Financial Interest ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

Users With an Indirect Financial Interest (cont’d) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

Government and Not-for-Profit Organizations ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

Discussion Copyright © Houghton Mifflin Company. All rights reserved. 1– ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Financial Accounting ,[object Object]

Business Transactions ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

[object Object],Discussion Copyright © Houghton Mifflin Company. All rights reserved. 1– ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],(b) (c) (a) (b) (a)

Sole Proprietorships ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1 –

Partnerships ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1 –

Sole Proprietorships and Partnerships versus Corporations ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1– ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Sole Proprietorships and Partnerships Corporations

Discussion ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

Financial Position Copyright © Houghton Mifflin Company. All rights reserved. 1– The economic resources that belong to a company and the claims against those resources at a point in time Economic Resources = Equities

Developing the Accounting Equation Copyright © Houghton Mifflin Company. All rights reserved. 1– Economic Resources = Equities ,[object Object],[object Object],[object Object],Economic Resources = Creditor’s Equities + Owner’s Equities In accounting terminology Economic resources are called assets Creditor’s equities are called liabilities Assets Liabilities

Accounting Equation ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

Transactions That Affect Owner’s Equity ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1 –

Copyright © Houghton Mifflin Company. All rights reserved. 1– Cash John Shannon, Capital 1.+$50,000 +$50,000 Owner’s Investments ,[object Object],A = $50,000 L + OE = $50,000 Notice that the accounting equation Assets = Liabilities + Owner's Equity, or A = L + OE, is always in balance

Copyright © Houghton Mifflin Company. All rights reserved. 1– Cash John Shannon, Capital Building Land 1. $50,000 $50,000 2. -35,000 + $10,000 +$25,000 Purchase of Assets with Cash ,[object Object],This transaction only affects one side of the accounting equation – Assets Whenever a transaction affects only one side of the accounting equation, the total on each side of the equal sign remains unchanged A = $50,000 L + OE = $50,000 bal. $15,000 $10,000 $25,000 $50,000

Copyright © Houghton Mifflin Company. All rights reserved. 1– Cash John Shannon, Capital Supplies Building Land A/P 1. $50,000 $50,000 2. -35,000 $10,000 $25,000 3. +$500 +$500 Purchase of Assets by Incurring a Liability ,[object Object],A = $50,500 L + OE = $50,500 bal. $15,000 $500 $10,000 $25,000 $500 $50,000

Copyright © Houghton Mifflin Company. All rights reserved. 1– Cash John Shannon, Capital Supplies Building Land A/P 1. $50,000 $50,000 2. -35,000 $10,000 $25,000 3. $500 $500 4. -200 -200 Payment of a Liability ,[object Object],A = $50,300 L + OE = $50,300 bal. $14,800 $500 $10,000 $25,000 $300 $50,000

Copyright © Houghton Mifflin Company. All rights reserved. 1– Cash John Shannon, Capital Supplies Building Land A/P 1. $50,000 $50,000 2. -35,000 $10,000 $25,000 3. $500 $500 4. -200 -200 5. +1,500 +1,500 Revenues ,[object Object],A = $51,800 L + OE = $51,800 bal. $16,300 $500 $10,000 $25,000 $300 $51,500

Copyright © Houghton Mifflin Company. All rights reserved. 1– Cash John Shannon, Capital Supplies A/R Building Land A/P 1. $50,000 $50,000 2. -35,000 $10,000 $25,000 3. $500 $500 4. -200 -200 5. 1,500 1,500 6. +$2,000 +2,000 Revenues ,[object Object],A = $53,800 L + OE = $53,800 bal. $16,300 $2,000 $500 $10,000 $25,000 $300 $53,500

Copyright © Houghton Mifflin Company. All rights reserved. 1– Cash John Shannon, Capital Supplies A/R Building Land A/P 1. $50,000 $50,000 2. -35,000 $10,000 $25,000 3. $500 $500 4. -200 -200 5. 1,500 1,500 6. $2,000 2,000 7. +1,000 -1,000 Collection of Accounts Receivable ,[object Object],A = $53,800 L + OE = $53,800 bal. $17,300 $1,000 $500 $10,000 $25,000 $300 $53,500

Copyright © Houghton Mifflin Company. All rights reserved. 1– Expenses Cash John Shannon, Capital Supplies A/R Building Land A/P 1. $50,000 $50,000 2. -35,000 $10,000 $25,000 3. $500 $500 4. -200 -200 5. 1,500 1,500 6. $2,000 2,000 7. 1,000 -1,000 8. -1,000 -1,000 ,[object Object],A = $52,800 L + OE = $52,800 bal. $16,300 $1,000 $500 $10,000 $25,000 $300 $52,500

Copyright © Houghton Mifflin Company. All rights reserved. 1– Expenses Cash John Shannon, Capital Supplies A/R Building Land A/P 1. $50,000 $50,000 2. -35,000 $10,000 $25,000 3. $500 $500 4. -200 -200 5. 1,500 1,500 6. $2,000 2,000 7. 1,000 -1,000 8. -1,000 -1,000 9. -400 -400 ,[object Object],A = $52,400 L + OE = $52,400 bal. $15,900 $1,000 $500 $10,000 $25,000 $300 $52,100

Copyright © Houghton Mifflin Company. All rights reserved. 1– Expenses Cash John Shannon, Capital Supplies A/R Building Land A/P 1. $50,000 $50,000 2. -35,000 $10,000 $25,000 3. $500 $500 4. -200 -200 5. 1,500 1,500 6. $2,000 2,000 7. 1,000 -1,000 8. -1,000 -1,000 9. -400 -400 10. +300 -300 ,[object Object],A = $52,400 L + OE = $52,400 bal. $15,900 $1,000 $500 $10,000 $25,000 $600 $51,800

Owner’s Withdrawals Copyright © Houghton Mifflin Company. All rights reserved. 1 – Cash John Shannon, Capital Supplies A/R Building Land A/P 1. $50,000 $50,000 2. -35,000 $10,000 $25,000 3. $500 $500 4. -200 -200 5. 1,500 1,500 6. $2,000 2,000 7. 1,000 -1,000 8. -1,000 -1,000 9. -400 -400 10. 300 -300 11. -600 -600 bal. $15,300 $1,000 $500 $10,000 $25,000 $600 $51,200 ,[object Object],A = $51,800 L + OE = $51,800

Discussion ,[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1– and the claims against those resources at a point in time ,[object Object],Assets = Liabilities + Owner’s Equity

Income Statement Copyright © Houghton Mifflin Company. All rights reserved. 1– Net income figure used to prepare statement of owner’s equity Date reflects revenues and expenses incurred over a period of time

Copyright © Houghton Mifflin Company. All rights reserved. 1 – Statement of Owner’s Equity Date reflects changes in John Shannon, Capital, over a period of time Net income figure from income statement Ending balance of John Shannon, Capital, used to prepare the balance sheet

Balance Sheet Copyright © Houghton Mifflin Company. All rights reserved. 1– Date reflects account balances as of a certain date Balance in Cash account used in statement of cash flows John Shannon, Capital, from statement of owner’s equity

Copyright © Houghton Mifflin Company. All rights reserved. 1 – Statement of Cash Flows Begins with net income from income statement Cash at end of month same as Cash account balance on balance sheet Date reflects cash flows over a period of time

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Financial Statements, GAAP, and the Independent CPA’s Report (Audit) Copyright © Houghton Mifflin Company. All rights reserved. 1– Financial Statements Audit

Organizations That Influence Current Practice ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

Organizations That Influence Current Practice (cont’d) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

Organizations That Influence Current Practice (cont’d) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

Institute of Management Accountants (IMA) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Copyright © Houghton Mifflin Company. All rights reserved. 1–

Lo Ppt01

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