Professional Documents
Culture Documents
Lectures Financial
1 to 6
Accounting
Lectures
7 to 12
Managerial
Accounting
1-1
Course Objectives
Course Schedule
Prescribed Text
Further Information
1-2
Course Assessment
Continuous Assessment
10%
10%
10%
20%
50%
1-3
BU8101
Accounting: A User Perspective
Lecture 1
Introduction to Accounting
1-4
1-5
Suggested Readings
Compulsory
Lecture notes
Chapters 1 (learning objectives 1 to 7) & 2 of Financial and
Managerial Accounting: The Basis For Business Decisions
17th edition by Williams, J.R., Hakka,S.F. and Bettner,
M.S. (2015).
Reference
1-6
Learning Objectives
1. Describe business and the goals of business
2. Explain the importance of accounting
1-7
LO 1
Learning Objective 1
Describe business
and the goals of
business
1-8
LO 1
Overview of Business
A business is an economic unit that aims to sell
goods and services to customers at prices that will
provide an adequate return to its owners.
Business Goals
Profitabilityearning a sufficient return to maintain owner
interest
Liquidityhaving enough cash to pay debts as they
come due
Some well-known businesses are:
1-9
LO 1
Financing Activities
Operating Activities
Used to acquire
operating assets
Investing Activities
1-10
LO 1
Financing Activities
1-11
LO 1
Investing Activities
1-12
LO 1
Operating Activities
Purchase of Goods for Sale
1-13
LO 2
Learning Objective 2
1-14
LO 2
Accounting:
the language of
business
is a
system that
Identifies Business
Activities
Records Business
Activities
Qualitative
Characteristics
Relevance
Faithful
representation
Comparability
Verifiability
Timeliness
Understandability
information
that is
Communicates
Business Activities
Decision-makers
use reports to make
Cost Constraint better decisions.
1-15
LO 2
1-16
LO 2
1-17
LO 2
Non-Profit
Organizations
Sole
Proprietorship
For-Profit
Organizations
Partnership
Private
Corporation
Publicly Traded
LO 2
1-18
Forms of For-Profit
Organizations
Sole
Proprietorship
Partnership
Corporation
LO 2
Sole
Proprietorships
Partnerships
Corporations
1-19
Ow ner's equity:
Jill Jones, capital
8,000
Partners' equity
Jill Jones, capital $ 4,000
Bill Jones, capital
4,000
Total partners' equity
$ 8,000
Owners' equity
Share capital
$ 7,000
Retained earnings
1,000
Total shareholders' equity
$ 8,000
1-20
Review Questions
1-21
LO 3
Learning Objective 3
LO 3
Financial
Statements
Reporting
1-22
Independent Auditors
Report (pages 82#)
Accounting
Professionals
#See Singpost Annual Report 2014
* Singapore Financial Reporting Standards
1-23
LO 3
Importance of Ethics
Ethics
Beliefs that
distinguish right
from wrong
Accepted
standards of good
and bad behavior
1-24
LO 3
Identify ethical
Analyze the
situations and
elements in the
ethical issues
situation involved
Use personal
ethics to identify
ethical situations
and issues
Identify stakeholders
persons who may be
harmed or benefited.
What are the
responsibilities and
obligations of parties
involved?
Identify options
and weigh the effect
of each option
Video clip
1-25
LO 3
Ethical Decision
Identify ethical
situations and
ethical issues
Analyze the
stakeholders in the
situation involved
Identify options
1-26
Review Questions
1-27
LO 4
Learning Objective 4
Explain elements of
the financial
statements and basic
accounting principles
1-28
LO 4
Principles
Historical cost: (or cost principle) dictates that companies
record assets at their cost.
LO 4
Financial Statements
1-29
Financial Statements
Statement of Financial Position (usually called Balance Sheet)
Statement of Comprehensive Income ( which consist of 2 parts:
the Income Statement plus Other Comprehensive Income)
Statement of Cash Flows
Statement of Changes in Equity
Notes to the financial statements
Green Lawn Care Service
Balance Sheet
May 31, 2014
Assets
Liabilities
Cash
$
26,200 Notes payable
$
Accounts receivable
500 Accounts payable
Equipment
2,500
Owners' Equity
Truck
15,000 Capital stock
Retained earnings
Total shareholders' equity
Total assets
$
44,200 Total liabilities & equity
$
13,000
2,500
28,000
700
28,700
44,200
1-30
LO 4
1-31
LO 4
Owners
capital
Sources of funds
Revenues
Expenses
_ Dividends
Net Income
Retained Earnings
Retained Earnings represents the total net income of the firm
over the entire lifetime of the business, less dividends
distributed to the shareholders.
1-32
LO 4
Owners Equity
Increases in Owners Equity are caused by:
Owners capital - the assets the owner puts into the
business.
Revenues - result from business activities entered into
for the purpose of earning income. Examples: sales,
fees, services, commissions.
Decreases in Owners Equity are caused by:
Dividends - Drawings by owner or distribution of
profits to owner.
Expenses - the cost of assets consumed or services
used in the process of earning revenue. Examples:
salaries expense, rent expense, utilities expense, etc.
1-33
Review Questions
$100,000
$40,000
?
$60,000
$30,000
$10,000
1-34
LO 5
Learning Objective 5
Analyze business
transactions using
the accounting
equation
1-35
LO 5
LO 5
1-36
Cash
5/1 $ 28,000
5/8
(2,000)
5/11
5/29
250
5/31
(50)
Bals $ 26,200
Assets
Accts.
+ Rec. + Equip. +
$2,500
500
$ 500
$ 2,500
Liabilities
+
Owners' Equity
Notes
Accts.
Capital
Retained
Truck = Payable + Pay. + Stock + Earnings
$ 28,000
$ 15,000
$ 13,000
$ 2,500
$750
(50)
$ 15,000
$ 13,000
$ 2,500
$ 28,000
$700
5/8 Truck costing $15,000 was purchased for $2,000 cash and signing a
note payable for $13,000.
5/11 Purchase lawn mower for $2,500 on account.
5/29 The company provided services for $750, of which $500 was on
account and the balance of $250 was received in cash.
5/31 Gasoline for the lawn mower and the truck of $50 was paid in cash.
LO 5
Cash
1/5 $28,000
8/5 (2,000)
11/5
29/5
250
31/5
(50)
Bals $26,200
$2,500
$500
$ 2,500
Liabilities
+
Owners' Equity
Notes
Accts.
Capital
Retained
Truck = Payable + Pay. + Stock + Earnings
$ 28,000
These
will
$ 15,000 balances
$ 13,000
$ 2,500
appear on the Balance
750
Sheet
(50)
$ 15,000
$ 13,000
$ 2,500
$ 28,000
$700
13,000
2,500
28,000
700
28,700
44,200
LO 5
1-38
LO 5
1-39
Liabilities
+ Owners' Equity
Accts
Notes
Accts. Capital Retained
Cash + . Rec. + Equip. + Truck = Payable + Pay. + Stock + Earnings
Statement of changes in equity
1/5 $8,000
$ 8,000
8/5 (2,000)
$ 15,000 $ 13,000
11/5
2,500
$ 2,500
29/5 250
500
750
Income
Statement of cash flows
31/5 (50)
(50)
statement
Bals $6,200 $500 $ 2,500 $ 15,000 $ 13,000 $ 2,500 $ 8,000
$700
LO 5
1-40
Income Statement
The income statement shows the profit for the period of
time under consideration.
Green Lawn Care Service
Income Statement
For the Month Ended May 31, 2014
Service Revenue
Operating Expense:
Gasoline Expense
Net Income
750
50
700
LO 5
1-41
28,000
700
28,700
LO 5
1-42
1-43
Review Questions
Deerpark Corporation recently borrowed $70,000 cash
1-44
LO 6
Learning Objective 6
LO 6
Date at beginning
of period
Time
Income Statement
1-45
Date at end of
period
Revenue
- Expenses
Net Income
Balance
Sheet
A = L + OE
Balance
Sheet
A = L + OE
1-46
Green Lawn Care Service
Income Statement
For the Month Ended May 31, 2014
200
Service Revenue
Operating Expense:
Gasoline Expense
Net Income
750
50
700
(2,000)
28,000
26,200
26,200
Beginning equity
Issuance of shares
Net income
less: Dividend
Ending equity
13,000
2,500
28,000
700
28,700
44,200
28,000
700
28,700
1-47
Review Questions
A transaction that causes an increase in an asset
Learning Outcomes
Do You Know?
1.
2.
3.
4.
5.
6.
7.
1-48
1-49
End of Lecture 1