Professional Documents
Culture Documents
Introduction to Accounting
and Business
Objectives
1. Describe the nature
of a business.
After studying
this
2. Describe the chapter,
role of accounting
in business.
you should
3. Describe the importance
business ethics and
be ableofto:
the basic principles of proper ethical conduct.
4. Describe the profession of accounting.
5. Summarize the development of accounting
principles and relate them to practice.
6. State the accounting equation and define each
element of the equation.
Objectives
7. Explain how business transactions can be
stated in terms of the resulting change in the
basic elements of the accounting equation.
8. Describe the financial statements of a
proprietorship and explain how they interrelate.
9. Use the ratio of liabilities to owners equity to
analyze the ability of a business to withstand
poor business conditions.
STEP ONE
ANALYZING
LOOKING AT EVENTS THAT HAVE
TAKEN PLACE AND THINKING
ABOUT HOW THEY AFFECT THE
BUSINESS
STEP TWO
RECORDING
ENTERING FINANCIAL
INFORMATION ABOUT EVENTS INTO
THE ACCOUNTING SYSTEM
STEP THREE
CLASSIFYING
SORTING AND GROUPING SIMILAR
ITEMS TOGETHER
STEP FOUR
SUMMARIZING
BRINGING THE VARIOUS ITEMS OF
INFORMATION TOGETHER TO
DETERMINE A RESULT
STEP FIVE
REPORTING
TELLING THE RESULTS
STEP SIX
INTERPRETING
DECIDING THE MEANING AND
IMPORTANCE OF THE INFORMATION
IN VARIOUS REPORTS
Types of Businesses
Service Business
Product
Triwasana
Garuda Indonesia
Hilton Hotels
Bank BRI
Telkomsel
Entertainment
Transportation
Hospitality and lodging
Financial
Telecommunication
Types of Businesses
Merchandising Business
Product
Matahari
Toys City
Electronic City
Amazon.com
General merchandise
Toys
Consumer electronics
Internet books, music, video
retailer
Types of Businesses
Manufacturing Business
Product
A proprietorship
is owned by one
individual.
Joes
Advantages
Ease in organizing
Low cost of
organizing
Disadvantage
Limited source of
financial resources
Unlimited liability
A partnership is
owned by two or
more individuals.
Advantages
More financial
resources than a
proprietorship.
Additional
management skills.
Disadvantage
Unlimited liability.
A corporation is
organized under state
or federal statutes as a
separate legal entity.
J & M, Inc.
Advantage
The ability to obtain
large amounts of
resources by issuing
stocks.
Disadvantage
Double taxation.
Business Strategies
A business strategy is an integrated
set of plans and actions designed to
enable the business to gain an
advantage over its competitors, and
in doing so, to maximize its profits.
Business Strategies
Under a low-cost strategy, a business
designs and produces products or
services of acceptable quality at a cost
lower than that of its competitors.
Wal-Mart
Southwest Airlines
Business Strategies
Under a differential strategy, a business
designs and produces products or services
that possess unique attributes or
characteristics which customers are willing
to pay a premium price.
Maytag
Tommy Hilfiger
Business
Processes
Products or
Services
Customer
Value
Business Stakeholders
A business stakeholder is a person or
entity having an interest in the
economic performance of the business.
The Process of
Providing Information
Identify
stakeholders.
STAKEHOLDERS
External:
Internal:
Customers,
Owners,
creditors,
managers,
government
employees
Assess
stakeholders
informational
needs.
The Process of
Providing Information
Record
economic
data about
business
activities
and events.
Accounting
Information
System
Design the
accounting
information
system to meet
stakeholders
needs.
The Process of
Providing Information
STAKEHOLDERS
Internal:
Owners,
managers,
employees
Prepare
accounting
reports for
stakeholders.
External:
Customers,
creditors,
government
Accounting
Information
System
Business Ethics
Sound
Principles that
form the
foundation for
ethical
behavior
Profession of Accounting
Accountants employed by a business firm or
a not-for-profit organization are said to be
engaged in private accounting.
Accountants and their staff who provide
services on a fee basis are said to be
employed in public accounting.
Generally Accepted
Accounting
Principles (GAAP)
What is a business
transaction?
On November 1,
2005, Chris
Clark begins a
business that will
be known as
NetSolutions.
a.
Assets
Cash
25,000
Owners Equity
Chris Clark, Capital
25,000 Investment
by Chris
Clark
Assets
Cash + Land
Bal. 25,000
b. 20,000
+20,000
Bal. 5,000
20,000
=
=
Owners Equity
Chris Clark, Capital
25,000
25,000
20,000
+ 1,350
1,350
20,000
Owners
Liabilities + Equity
Accounts
Chris Clark,
Payable
Capital
25,000
+ 1,350
1,350
25,000
Owners
Liabilities + Equity
Accounts
Chris Clark,
Payable
Capital
1,350
25,000
+ 7,500 Fees
earned
1,350
32,500
Bal.8,850
1,350
20,000
Owners
Liabilities + Equity
Accounts
Chris Clark,
Payable
Capital
1,350
32,500
2,125 Wages
800 Rent
450 Util.
275 Misc.
1,350
28,850
Owners
Liabilities + Equity
Accounts
Chris Clark,
Payable
Capital
1,350
28,850
950
400
28,850
Owners
Liabilities + Equity
Accounts
Chris Clark,
Payable
Capital
400
28,850
800 Supplies
expense
400
28,050
Owners
Liabilities + Equity
Accounts
Chris Clark,
Payable
Capital
400
28,050
2,000 Withdrawal
400
26,050
Increased by
Owners
withdrawals
Owners
investments
Expenses
Revenues
Net
income
Financial Statements
Income statementA summary of the revenue
and expenses for a specific period of time.
Statement of owners equityA summary of
the changes in the owners equity that have
occurred during a specific period of time.
Balance sheetA list of the assets, liabilities,
and owners equity as of a specific date.
Statement of cash flowsA summary of the
cash receipts and disbursements for a specific
period of time.
NetSolutions
Income Statement
For the Month Ended November 30, 2005
Fees earned
$7 500 00
Operating expenses:
Wages expense
$2 125 00
800 00
Rent expense
Supplies expense
Utilities expense
Miscellaneous expense
Total operating expenses
Net income
To the statement
of owners equity
800 00
450 00
275 00
4 450 00
$3 050 00
NetSolutions
Statement of Owners Equity
For the Month Ended November 30, 2005
Chris Clark, capital, November 1, 2005
Investment on November 1
From the income
Net income for November
statement
$25 000 00
3 050 00
$28 050 00
2 000 00
Less withdrawals
Increase in owners equity
To
the
Chris Clark, capital, November 30, 2005
balance sheet
26 050 00
$26 050 00
NetSolutions
Balance Sheet
November 30, 2005
Assets
Cash
Supplies
Land
Total assets
From the
statement of
Liabilities owners equity
NetSolutions
Statement of Cash Flows
For the Month Ended November 30, 2005
Cash flows from operating activities:
Cash received from customers
$ 7 500 00
Deduct cash payments for expenses
and payments to creditors
4 600 00
Net cash flow from operating activities
2 900 00
Cash flows from investing activities:
Cash payment for acquisition of land
(20 000 00 )
Cash flows from financing activities:
Cash received as owners investment
$25 000 00
Deduct cash withdrawal by owner
2 000 00
Net cash flow from financing activities
23 000 00
Net cashShould
flow and
Nov.
30, 2005
bal. sheet
$ 5 900 00
match
Cash
on thecash
balance
Chapter 1
The End