fundamental accounting principles基本会计原则

ACCT 102,Accounting in Business,Chapter,1,Learning objectives,1. Why accounting?2. What is accounting?3. Ethics in accounting 4. Accounting model / Accounting equation5. Transaction analysis and recording6. Financial Statement7. Decision analysis: ROE & ROA Case: Coca Cola, Pepsi & Cadbury Schweppes,1. Why accounting?,Related parties of a business,2. What is accounting,Language of businessHelp users to make better decisionInformation and measurement systemTo identify, record, and communicate business activitiesProvide relevant, reliable, and comparable information,Identifies,Records,Communicates,Relevant,Reliable,Comparable,2. What is accounting,Accounting,is asystem that,information that is,to help users make better decisions.,Identifying Business Activities,Recording Business Activities,Communicating Business Activities,2. What is accounting,Financial and Managerial accounting,Internal Users,Managerial accounting provides information needs for internal decision makers.,Beliefs that distinguish right from wrong,Accepted standards of good and bad behavior,3. Ethics in Accounting,Accounting Scandals,Accounting frauds in current yearsEnron (2001)Worldcom (2002)Parmalat (2003)AIG (2005)Parties pay dearly for the fraudEnron Managers CFO 10 year in prison (Jan,14,2004)CAO 7 years in prison (Dec,28,2005)Chairman maximum 45 years in prison (May,25,2006)CEO maximum 185 years in prison (May,25,2006)Investors Stock Price $90 on Aug,2000Less than $1 on Nov,28,2001,4. Accounting principles,General principles: basic assumptions, concepts, and guidelines for preparing financial statements. Specific principles: detailed rules used in reporting business transactions and events.,Financial accounting practice is governed by concepts and rules known as generally accepted accounting principles (GAAP).,GAAP,The Securities and Exchange Commission is the government group that establishes reporting requirements for companies that issue stock to the public.,FASB and SEC,Financial Accounting Standards Board is the private group that sets both broad and specific principles.,Setting Accounting Principles,Hong Kong: Hong Kong Institute of Certified Public Accountants (HKICPA) ChinaMinistry of Finance Peoples Republic of ChinaInternational Accounting Standard Board (IASB)International Financial Reporting Standards (IFRS),Principles of Accounting,Principles of Accounting,Business Entity Forms,Proprietorship,Partnership,Corporation,*,Characteristics of Businesses,Exh.1.8,*,Owners of a corporation are called shareholders (or stockholders).When a corporation issues only one class of stock, we call it common stock (or capital stock).,Corporation,Assets,Liabilities & Equity,4. Accounting Equation,資產,負債所有者權益,Accounting Equation,Assets Resources with future benefits that are owned or controlled by a company. LiabilitiesSource of fund from creditorsWhat a company owes its creditors of future products or services. EquitySource of fund from owners The claims of its owners,Land,Equipment,Buildings,Cash,Vehicles,Store Supplies,Notes Receivable,Accounts Receivable,Resources owned or controlled by a company,Assets: Resources owned or controlled by a business,Taxes Payable,Wages Payable,Notes Payable,Accounts Payable,Creditors claims on assets,Liabilities: creditors claim on assets.,Ownersclaims on assets,Revenues,Owner Investments,Owner Withdrawals,Expenses,Equity: the owners claim on assets.,Expanded Accounting Equation,Expanded Accounting Equation,Revenues: gross increase in equity from a companys earnings activities. Expenses: the cost of assets or services used to earn revenue. Expenses decrease owners equity. Owner investments: the assets an owner puts into the company. Owner withdrawals: the assets take away from the company for personal use.,The accounting equation must remain in balance after each transaction.,5. Transaction Analysis,1. J. Scott, the owner, contributed $20,000 cash to start the Scott Company.2. Purchased supplies paying $1,000 cash.3. Purchased equipment for $15,000 cash.4. Purchased Supplies of $200 and Equipment of $1,000 on account.5. Borrowed $4,000 from 1st American Bank.6. Rendered consulting services receiving $3,000 cash.7. Paid salaries of $800 to employees.8. J. Scott withdrew $500 from the business for personal use.,Transactions,The accounts involved are:(1) Cash (asset)(2) J. Scott, Capital (equity),J. Scott, the owner, contributed $20,000 cash to start the business.,Transaction 1,Transaction 1,J. Scott, the owner, contributed $20,000 cash to start the business.,The accounts involved are:(1) Cash (asset)(2) Supplies (asset),Transaction 2,Purchased supplies paying $1,000 cash.,Transaction 2,Purchased supplies paying $1,000 cash.,The accounts involved are:(1) Cash (asset) (2) Equipment (asset),Transaction 3,Purchased equipment for $15,000 cash.,Transaction 3,Purchased equipment for $15,000 cash.,The accounts involved are:(1) Supplies (asset)(2) Equipment (asset)(3) Accounts Payable (liability),Transaction 4,Purchased Supplies of $200 and Equipment of $1,000 on account.,Transaction 4,Purchased Supplies of $200 and Equipment of $1,000 on account.,The accounts involved are:(1) Cash (asset) (2) Notes payable (liability),Transaction 5,Borrowed $4,000 from 1st American Bank.,Transaction 5,Borrowed $4,000 from 1st American Bank.,Transaction Analysis,The balances so far appear below. Note that the Balance Sheet Equation is still in balance.,Now lets look at transactions involving revenue, expenses and withdrawals.,The accounts involved are:(1) Cash (asset) (2) Revenues (equity),Transaction 6,Rendered consulting services receiving $3,000 cash.,Transaction 6,Rendered consulting services receiving $3,000 cash.,The accounts involved are:(1) Cash (asset)(2) Salaries expense (equity),Transaction 7,Paid salaries of $800 to employees.,Remember that the balance in the salaries expense account actually increases. But, equity actually decreases because expenses reduce equity.,Transaction 7,Remember that expenses decrease equity.,Paid salaries of $800 to employees.,The accounts involved are:(1) Cash (asset)(2) J. Scott, Withdrawals (equity),Transaction 8,J. Scott withdrew $500 from the business for personal use.,Remember that the balance in the J. Scott, Withdrawals account actually increases. But, equity actually decreases because withdrawals reduce equity.,Transaction 8,Remember that withdrawals decrease equity.,J. Scott withdrew $500 from the business for personal use.,5. Financial Statements,Lets prepare the Financial Statements reflecting the transactions we have recorded.,Income StatementStatement of Owners EquityBalance SheetStatement of Cash Flows,Net income is the difference between Revenues and Expenses.,The income statement describes a companys revenues and expenses along with the resulting net income or loss over a period of time due to earnings activities.,The net income of $2,200 increases Scotts capital by $2,200.,The Statement of Owners Equity explains changes in equity from net income (or net loss) and from owner investments and withdrawals for a period of time.,The Balance Sheet describes a companys financial position at a point in time.,The Statement of Cash Flows identifies cash inflows and cash outflows over a period of time.,ROE = Net income Average Shareholders Equity,ROE evaluates efficiency of management using owner s capital to add value for owner,6. Decision analysis - Return on Equity (ROE) & Return on Assets (ROA),Comparison: with competitor with prior period,ROE is used by