4. BUSINESS FUNCTIONS
F i n a n c e
เนนทีเ่ งิน: ดูแลการจัดหาเงิน
และใชเงิน เลือกลงทุนเพื่อ
ใหเกิดผลตอบแทนทีคุมคา
่
ที่สด
ุ
Accounting
and Information
Systems
เนนผูใชขอมูล: จัดเตรียม
ขอมูลทีเหมาะสมกับการ
่
ใชงานของฝายตางๆ
ในองคกร รวมถึงผูใช
ภายนอกองคกร
5. Forms of Business Organization
• Sole Proprietorship
– Single individual
– Unlimited Liability
• Partnership Firms
– A few individuals
– Unlimited Liability
• Limited company
– Numerous individuals, often strangers
– Large business
– Limited liability
9. UNDERSTANDING BUSINESS ORGANIZATIONS
• Business provide goods and services in
order to earn profit.
• Business that provide goods are of three
kinds:
Merchandising (Trading)
Manufacturing
Service
12. Investment by owners
Loans from creditors
Monetary
resources(Capital)
Buy land,
buildings, and
equipment
Purchase
materials and
supplies
Business earnings
Pay employee
Pay other
operating
exp.
Produce good and
service
Monetary resources from sale of goods
and services
Pay return to
owners
Pay
Loan
Pay
Tax
Continue business
Activities
วงจรธุรกิจ (Business Cycle)
14. What is Accounting?
• Accounting is often called the language of
Business.
• Accounting, as an information system, is the process
of identifying, measuring, and communicating the
economic information of an organization to its users
who need the information for decision making.
15. Definition of Accounting
• The American Institute of Certified Public
Accountants (AICPA) defines accounting as
“the art of recording, classifying and
summarizing in a significant manner and in
terms of money transactions and events
which are, in part at least, of a financial
character, and interpreting the results
thereof”.
17. Accounting –
The Language of Business
Accounting is the information system that...
Accounting is the information system that...
measures business activities,
measures business activities,
processes data into reports, and
processes data into reports, and
communicates results to decision makers.
communicates results to decision makers.
17
18. OBJECTIVES OF ACCOUNTING
To maintain accounting records. เพื่อจดบันทึก
รายการต า ง ๆ ที่ เ กิ ด ขึ้ น เรี ย งตามลํ า ดั บ ก อ นหลั ง และจํ า แนก
ประเภทของรายการคาไวอยางสมบูรณ และถูกตองตามหลักการ
บัญชีและตามกฎหมายวาดวยการบัญชี
To calculate the results of operation เพื่อ
ประเมินผลการดําเนินงาน
To ascertain the financial position เพื่อทราบ
สถานะทางการเงินขององคกร
To communicate the information to the users
เพื่อแจงขอมูลขาวสารแกผูเกี่ยวของ
19. USERS OF ACCOUNTING INFORMATION
External Users:
Investors (present and potential)
Lenders
Suppliers
Internal Users:
Public Group:
Management group:
Board of Directors
Partners
Managers
Officers
Govt and Regulatory Authorities
Employees and Trade Unions
Customers
Rating Agencies
Others:
Security Analysts
Academicians
Researchers
22. Overview of the Accounting Process
Source
documents
Transaction
Prepare financial
statements and report
งบการเงิน (งบกําไรขาดทุน /
Prepare a trial
balance
งบดุล ฯลฯ )
งบทดลอง
Post to the
ledger
บัญชีแยกประเภท
Analyze
Record
transactions
23. Transactions and Events
Exchanges of economic consideration between
two parties.
External Transactions
occur between the
organization and an
outside party.
Internal Transactions
occur within the
organization.
25. Branches /Classification of Accounting
Accounting
Financial
Accounting
Cost
Accounting
Management
Accounting
Other Emerging
Branches
Human
Resource
A/cing
Responsibility
A/cing
Inflation
A/cing
26. The Accounting Information System
INPUT
Economic events
measured in
financial terms
PROCESS
•Recording
•Classifying
•Summarizing
•Analyzing
•Interpreting
OUTPUT
Communicating
information to users
*P&L A/cงบกําไรขาดทุน
*B/S Balance sheet
งบดุล
*CFS Cash flow
statement
งบประแสเงินสด ,etc)
27. Financial Statements
Profit and Loss A/c งบกําไรขาดทุน
Statement of financial performance
Balance sheet งบดุล
Statement of financial position
Statement of cash flows งบกระแสเงินสด
Statement of cash receipts and cash
payments
28. The financial statements are a picture
Theof the company in financial terms.
Financial Statements
Each financial statement relates to a specific
date or covers a particular period.
28
29. The Accounting Equation
Assets are the economic resources
of a business that are expected to
produce a benefit in the future.
Liabilities are “outsider claims,”
or economic obligations
payable to outsiders.
Owners’ equity represents the
“insider claims” of a business.
29
30. Assets ทรัพยสน
ิ
What a business
“owns”
Probable future economic benefits
Examples
Cash
Investments
Buildings
Plant and Machinery
Patents and Copyrights
37. ประเภทของหนี้สิน (Liability)
แบงเปน 2 ประเภท ดังนี้
1. หนี้สินหมุนเวียน (Current Liabilities)
2. หนี้สนระยะยาว หรือหนี้สินอืนๆ
ิ
่
(Long term or other Liabilities)
38. Owner’s Equity
• It is what’s left of the assets after liabilities
have been deducted (Residual interest of
owners)
– the same as net assets
– the owner’s claim on the entity’s
assets
Examples
Share capital
Share premium
Revenues
Retained profit
44. Information Reported on the
Financial Statements
Question
Answer
1. How well did the
company perform
(or operate) during
the period?
Revenues
– Direct Expenses
Gross income (Gross loss)
1. How well did the
company perform
(or operate) during
the period?
Gross Profit
– Indirect Expenses
Net income (Net loss)
44
Financial
Statement
Trading
Account
Profit and
Loss
Account
45. Information Reported on the
Financial Statements
Question
3. What is the company’s
financial position at the
end of the period?
4. How much cash did
the company generate
and spend during
the period?
45
Answer
Assets
= Liabilities
+ Owners’ equity
Operating cash flows
± Investing cash flows
± Financing cash flows
Increase or decrease in cash
Financial
Statement
Balance
sheet
Statement
of
cash
flows
46. Income Statement งบกําไรขาดทุน
The income statement,
reports the company’s revenues,
expenses, and net income
or net loss for the period.
46
47. Introduction to the
Income Statement
The income statement is a financial
tool that provides information about
a company’s past performance.
47
49. Income Statement Format
Sales revenues
Selling and
– Cost of goods sold – administrative =
expenses
Gross profit
Add: Other revenues and gains
Less: Other expenses and losses
49
Operating
income
50. Transactions that Affect
Owner’s Equity
OWNER’S EQUITY
DECREASES
OWNER’S EQUITY
INCREASES
Owner Withdrawals
from the Business
Owner Investments
in the Business
Owner’s Equity
Revenues
Expenses
51. Income Statement
Revenue
Cost of Goods Sold
Gross Margin
- the proceeds that come from sales to customers
- an expense that reflects the cost of the product
or good that generates revenue. .
- also called gross profit, this is revenue minus
COGS
Operating Expenses
- any expense that doesn't fit under COGS
such as administration and marketing expenses.
Net Income before Interest and Tax - net income before taking interest
and income tax expenses into account.
Interest Expense
- the payments made on the company's
outstanding debt.
Income Tax Expense - the amount payable to government.
Net Income
51
- the final profit after deducting all expenses from
revenue.
52. The Income Statement can be divided
into:
• Trading Account
• Profit and Loss Account
52
53. The Accounting Terms
Revenues are inflows or other
enhancements of assets to an entity.
They are amounts received or to be received from
customers for sales of products or services.
sales
performance of services
rent
interest
53
They result from delivering or
producing goods, rendering services,
or other activities that constitute the
entity’s major or central operations.
54. The Accounting Terms
Expenses are outflows or
other using up of assets.
They are amounts that have been paid or will be paid later for
costs that have been incurred to earn revenue.
salaries and wages
utilities
supplies used
advertising
54
They result from delivering or
producing goods, rendering services,
or other activities that constitute the
entity’s major or central operations.
55. The Accounting Terms
– Gross profit (gross margin) - excess of sales
revenue over the cost of inventory that was
sold
– Operating expenses - a group of recurring
expenses that pertain to a firm’s routine
operations
– Operating income (operating profit) - gross
profit less all operating expenses
– Other revenues and expenses - items not
directly related to the main operations of a
firm
55
56. The Accounting Terms
• Net income - the remainder after all
expenses (including income taxes) have
been deducted from revenue
– Often seen as the “bottom line”
• Net loss - the excess of expenses over
revenues
56
57. Analyzing Transactions
Analyze the transaction
and its source.
Identify the impact of the
transaction on account
balances.
Also identify the financial
statements that are
impacted by the
transaction.
58. Importance of managerial accounting
information for decision making
Decision making
Planning
Directing
Improving
Controlling
59. Cost Concept
Cost : a payment of cash; or its equivalent; or the
commitment to pay cash in the future for the
purpose of generating revenues
By behavior
Classification
of costs
By function
By period
60. Classification by behavior
1. Fixed costs
2. Variable costs
Does not change when the volume
of activity changes.
Changes in proportion with the
changes in the volume of activity.
3. Semi variable costs
A mixed of fixed and
variable costs.
64. Classification by function
1. Manufacturing costs
2. Administration costs
3. Selling costs
Cost incurred in the
process of transferring
raw material to finished
goods.
Cost incurred and
related to administration
activities.
Cost incurred and related to
the selling and distributing
activities.
65. Manufacturing Cost Concept
Manufacturing consists of activities and
processes that convert raw materials into finished
goods.
Manufacturing costs are usually classified as follows:
Direct materials
Direct labor
Manufacturing overhead
66. Manufacturing Cost : Direct Materials
Raw materials are the basic materials and parts
that are to be used in the manufacturing process.
Raw materials that can be physically and directly
associated with the finished product during the
manufacturing process are called direct
materials.
67. Manufacturing Cost : Indirect Materials
Some raw materials cannot be easily associated
with the finished product. These are considered
indirect materials.
Are accounted for as part of manufacturing
overhead and :
1
do not physically become part of the finished
product; or
2 cannot be traced because their physical association
with the finished product is too small in terms of
cost.
68. Manufacturing Cost : Direct Labor
The wages of maintenance people, timekeepers,
and supervisors are usually identified as indirect
labor. Their efforts have no physical association
with the finished product.
Direct labor is the work of factory employees
that can be physically and directly associated with
converting raw materials into finished goods.
Like indirect materials, indirect labor is
part of manufacturing overhead.
69. Manufacturing Cost : Overhead
Manufacturing overhead consists of costs that
indirectly associated with the manufacture of
finished product.
are
the
These costs may also be manufacturing costs that
cannot be classified as direct materials or direct labor.
Manufacturing overhead includes
1 indirect materials;
2 indirect labor;
3 depreciation on factory buildings and machines
4 insurance, taxes, and maintenance on
factory facilities.
70. Product Cost vs. Period Cost
Product costs include each of the
manufacturing cost elements (direct materials,
direct labor, and manufacturing overhead);
they are costs that are a necessary and integral
part of producing the finished product.
These costs are not expensed to cost of goods
sold under the matching principle until the
finished goods inventory is sold.
71. Product Cost vs. Period Cost
Direct labor and manufacturing overhead are
often referred to as conversion costs since they
are incurred in converting raw materials into
finished goods.
Direct materials and direct labor are often referred to
as prime costs due to their direct association with
the manufacturing of the finished product.
72. Product Cost vs. Period Cost
Period costs:
are identifiable with a specific time period,
relate to non-manufacturing non-inventoriable costs,
and
include selling and administrative expenses.
73. Product Cost vs. Period Cost
Manufacturing Costs
Direct Material
Product Cost
Direct Labor
Factory OH
Non-manufacturing Costs
Period Cost
Prime Cost
Selling Expenses
Admin Expenses
Conversion Cost
74. The Breakeven Point (BEP)
The level of activity, in
units or dollars, at which
REVENUES = COSTS
74
75. Basic Assumption: Relevant Range
Company is operating within the relevant
range of activity specified in determining the revenue
and cost information used.
Total
$
Relevant
Range
Activity Level
75
76. Basic Assumption: Revenue
Total revenue fluctuates in direct proportion to level
of activity or volume. On a per unit basis, the selling
price remains constant.
Total
$
Activity Level
76
77. Basic Assumption: Variable Costs
Total variable costs fluctuate in direct proportion to
level of activity or volume. On a per unit basis,
variable costs remain constant.
Total
$
Activity Level
77
78. Basic Assumption: Fixed Costs
Total fixed costs remain constant relative to activity
level changes. Per-unit fixed costs decrease as
volume increases and increase as volume decreases.
Total
$
Activity Level
78
79. Basic Assumption: Mixed Costs
Mixed costs must be separated into variable and fixed
elements.
Total
$
Activity Level
79
80. Breakeven Point
Breakeven point is the point at which profits
are zero because total revenues equal total
costs, or
Total revenues = Total fixed costs + Total variable
costs
TR=TFC+TVC
PxQ=TFC+TVC
PXQ=TFC+(QxVC)
80
81. Cost Behavior Example
Selling price per PIECE
$40
Variable production cost PIECE
Variable selling cost per PIECE
Total variable cost per PIECE
$20
4
$24
Fixed production costs
Fixed selling and administrative costs
$100,000
20,000
81
82. Continuing . . . Breakeven Point
TR=TFC+TVC
PxQ=TFC+TVC
PXQ=TFC+(QxVC)
In units
40 X Q =120,000+(Q X 16)
40Q
=120,000+24Q
40Q-24Q=120,000
16Q
=120,000
Q
=7,500 PIECE
In dollars
7,500 x 40 = 300,000 USD
82
83. Break Even Analysis
Costs/Revenue
TR
TR
TC
VC
TheInitially theis
Total lower even
revenue
Thebreak a firm
pointoutput is
determinedless
will incur fixed
As occurs where
price, the by
The total costs
total revenuethe
the costs, charged
price
generated,
steep thethese
therefore total
anddo willcurve.
the quantity
firm not
equals total
revenue depend
(assumingincur
sold ––again this–in
on the
variable firm,
costs output or
accurate costs
will sales.
these
this be vary would
example,
forecasts!) is the
determined by the
directly with to
have to sell Q1
sum of FC+VC
expected sufficient
amount
generate
forecast sales
produced.
revenue to cover its
initially.
costs.
FC
Q1
Output/Sales
83
84. Break Even Analysis
Costs/Revenue
TR (p = £3)
TR (p = £2)
TC
VC
If the firm
chose to set
price higher
than £2
(say £3) the
TR curve
would be
steeper – they
would not
have to sell as
many units to
break even
FC
Q2
Q1
Output/Sales
84
85. Break Even Analysis
TR (p = £1)
Costs/Revenue
TR (p = £2)
TC
VC
If the firm
chose to set
prices lower
(say £1) it
would need to
sell more units
before
covering its
costs.
FC
Q1
Q3
Output/Sales
85
87. Break Even Analysis
Costs/Revenue
TR (p = £3)
A higher price
would lower the
break even
point and the
margin of safety
would widen.
Assume
current
sales at
Q2.
TR (p = £2)
TC
VC
Margin of Safety
Margin of
safety shows
how far sales
can fall before
losses made. If
Q1 = 1000 and
Q2 = 1800,
sales could fall
by 800 units
before a loss
would be
made.
FC
Q3
Q1
Q2
Output/Sales
87
