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[object Object],[object Object],Accounting,  Third Edition
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Study Objectives
[object Object],[object Object],[object Object],Forms of Business Organization Users and Uses of Financial Information Business Activities Communicating with Users A Quick Look at Tootsie Roll’s Financial Statements ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Introduction to Financial Statements
Forms of Business Organization Proprietorship Partnership Corporation ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],SO 1  Describe the primary forms of business organization.
Users and Uses of Financial Information Management Common Questions Human Resources IRS Labor Unions SEC Marketing Finance Investors Creditors SO 2  Identify the users and uses of accounting information.  Customers Internal Users External Users
[object Object],Users and Uses of Financial Information User 1.  Can we afford to give our employees a pay raise? Human Resources 2.  Did the company earn a satisfactory income? 3.  Which product line is most profitable? 4.  Is cash sufficient to pay dividends to the stockholders? 5.  What price for our product will maximize net income? 6.  Will the company be able to pay its short-term debts? Investors Management Finance Marketing Creditors SO 2  Identify the users and uses of accounting information.
 
 
Users and Uses of Financial Information Ethics In Financial Reporting ,[object Object],[object Object],[object Object],[object Object],SO 2  Identify the users and uses of accounting information.
Users and Uses of Financial Information SO 2  Identify the users and uses of accounting information.  Illustration 1-4  Steps in analyzing ethics cases
 
Users and Uses of Financial Information ,[object Object],[object Object],[object Object],[object Object],[object Object],Review Question SO 2  Identify the users and uses of accounting information.
Business Activities ,[object Object],[object Object],[object Object],[object Object],SO 3  Explain the three principal types of business activity.  The  accounting information system  keeps track of the results of each of these business activities.
Business Activities Financing Activities ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],SO 3  Explain the three principal types of business activity.
Business Activities Investing Activities ,[object Object],[object Object],[object Object],SO 3  Explain the three principal types of business activity.
Business Activities Operating Activities ,[object Object],[object Object],[object Object],[object Object],SO 3  Explain the three principal types of business activity.
Business Activities ,[object Object],[object Object],[object Object],[object Object],[object Object],SO 3  Explain the three principal types of business activity.  Operating Activities
Communicating with Users Companies prepare four financial statements from the summarized accounting data: Balance Sheet Income Statement Statement of Cash Flows Retained Earnings Statement SO 4  Describe the content and purpose of each of the financial statements.
Communicating with Users ,[object Object],[object Object],[object Object],[object Object],[object Object],Review Question SO 4  Describe the content and purpose of each of the financial statements.
Communicating with Users ,[object Object],[object Object],[object Object],SO 4  Describe the content and purpose of each of the financial statements. Income Statement Illustration 1-5
Communicating with Users Income Statement SO 4  Describe the content and purpose of each of the financial statements. Retained Earnings Statement Net income is needed to determine the ending balance in stockholder’s equity. Illustration 1-6 Illustration 1-5
Communicating with Users SO 4  Describe the content and purpose of each of the financial statements. Retained Earnings Statement ,[object Object],Illustration 1-6
Communicating with Users SO 4  Describe the content and purpose of each of the financial statements. Retained Earnings Statement The ending balance in retained earnings is needed in preparing the balance sheet Balance Sheet Illustration 1-8 Illustration 1-6
Communicating with Users ,[object Object],[object Object],[object Object],SO 5  Explain the meaning of assets, liabilities, and stockholders’ equity, and state the basic accounting equation. Balance Sheet Illustration 1-8
 
Communicating with Users ,[object Object],[object Object],[object Object],[object Object],Statement of Cash Flows Illustration 1-9 SO 5  Explain the meaning of assets, liabilities, and stockholders’  equity, and state the basic accounting equation.
Communicating with Users ,[object Object],[object Object],[object Object],[object Object],[object Object],Review Question SO 5  Explain the meaning of assets, liabilities, and stockholders’  equity, and state the basic accounting equation.
Other Elements of an Annual Report ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],SO 6  Describe the components that supplement the  financial statements in an annual report.
Other Elements of an Annual Report Management’s Report The SEC mandates inclusion of  Management’s Discussion and Analysis (MD&A) .  Management highlights favorable or unfavorable trends related to liquidity, capital resources, and results of operations.  SO 6  Describe the components that supplement the  financial statements in an annual report.
Other Elements of an Annual Report Management’s Report SO 6  Describe the components that supplement the  financial statements in an annual report. Illustration 1-15
Other Elements of an Annual Report Notes are the means of amplifying or explaining the items presented in the main body of the statements. Accounting Policies Companies should present a statement identifying the accounting policies adopted (Summary of Significant Accounting Policies). SO 6  Describe the components that supplement the  financial statements in an annual report.
Other Elements of an Annual Report Notes are the means of amplifying or explaining the items presented in the main body of the statements. SO 6  Describe the components that supplement the  financial statements in an annual report. Illustration 1-16
Other Elements of an Annual Report Auditor’s Report Standard  unqualified opinion  – auditor expresses the opinion that the financial statements are presented fairly, in all material respects, in conformity with GAAP. SO 6  Describe the components that supplement the  financial statements in an annual report. Illustration 1-17
Copyright “ Copyright © 2009 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.”

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Ch01

  • 1.  
  • 2.
  • 3.
  • 4.
  • 5.
  • 6. Users and Uses of Financial Information Management Common Questions Human Resources IRS Labor Unions SEC Marketing Finance Investors Creditors SO 2 Identify the users and uses of accounting information. Customers Internal Users External Users
  • 7.
  • 8.  
  • 9.  
  • 10.
  • 11. Users and Uses of Financial Information SO 2 Identify the users and uses of accounting information. Illustration 1-4 Steps in analyzing ethics cases
  • 12.  
  • 13.
  • 14.
  • 15.
  • 16.
  • 17.
  • 18.
  • 19. Communicating with Users Companies prepare four financial statements from the summarized accounting data: Balance Sheet Income Statement Statement of Cash Flows Retained Earnings Statement SO 4 Describe the content and purpose of each of the financial statements.
  • 20.
  • 21.
  • 22. Communicating with Users Income Statement SO 4 Describe the content and purpose of each of the financial statements. Retained Earnings Statement Net income is needed to determine the ending balance in stockholder’s equity. Illustration 1-6 Illustration 1-5
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  • 24. Communicating with Users SO 4 Describe the content and purpose of each of the financial statements. Retained Earnings Statement The ending balance in retained earnings is needed in preparing the balance sheet Balance Sheet Illustration 1-8 Illustration 1-6
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  • 30. Other Elements of an Annual Report Management’s Report The SEC mandates inclusion of Management’s Discussion and Analysis (MD&A) . Management highlights favorable or unfavorable trends related to liquidity, capital resources, and results of operations. SO 6 Describe the components that supplement the financial statements in an annual report.
  • 31. Other Elements of an Annual Report Management’s Report SO 6 Describe the components that supplement the financial statements in an annual report. Illustration 1-15
  • 32. Other Elements of an Annual Report Notes are the means of amplifying or explaining the items presented in the main body of the statements. Accounting Policies Companies should present a statement identifying the accounting policies adopted (Summary of Significant Accounting Policies). SO 6 Describe the components that supplement the financial statements in an annual report.
  • 33. Other Elements of an Annual Report Notes are the means of amplifying or explaining the items presented in the main body of the statements. SO 6 Describe the components that supplement the financial statements in an annual report. Illustration 1-16
  • 34. Other Elements of an Annual Report Auditor’s Report Standard unqualified opinion – auditor expresses the opinion that the financial statements are presented fairly, in all material respects, in conformity with GAAP. SO 6 Describe the components that supplement the financial statements in an annual report. Illustration 1-17
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Editor's Notes

  1. 1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image). Timeliness (no real time financial information)
  2. Service Cost - Actuaries compute service cost as the present value of the new benefits earned by employees during the year. Future salary levels considered in calculation. Interest on Liability - Interest accrues each year on the PBO just as it does on any discounted debt. Actual Return on Plan Assets - Increase in pension funds from interest, dividends, and realized and unrealized changes in the fair market value of the plan assets. Amortization of Unrecognized Prior Service Cost - The cost of providing retroactive benefits is allocated to pension expense in the future, specifically to the remaining service-years of the affected employees. Gain or Loss - Volatility in pension expense can be caused by sudden and large changes in the market value of plan assets and by changes in the projected benefit obligation. Two items comprise the gain or loss: difference between the actual return and the expected return on plan assets and, amortization of the unrecognized net gain or loss from previous periods
  3. Service Cost - Actuaries compute service cost as the present value of the new benefits earned by employees during the year. Future salary levels considered in calculation. Interest on Liability - Interest accrues each year on the PBO just as it does on any discounted debt. Actual Return on Plan Assets - Increase in pension funds from interest, dividends, and realized and unrealized changes in the fair market value of the plan assets. Amortization of Unrecognized Prior Service Cost - The cost of providing retroactive benefits is allocated to pension expense in the future, specifically to the remaining service-years of the affected employees. Gain or Loss - Volatility in pension expense can be caused by sudden and large changes in the market value of plan assets and by changes in the projected benefit obligation. Two items comprise the gain or loss: difference between the actual return and the expected return on plan assets and, amortization of the unrecognized net gain or loss from previous periods