Chapter 1             Power Notes    Introduction to Accounting and Business                 Learning Objectives    1.   N...
Chapter 1               Power Notes     Introduction to Accounting and Business  Slide # Power Note Topics      3   •   Ac...
Accounting — An Information Process            Identification              of Users                                      C...
Accounting — An Information Process            Identification              of Users                 User             Infor...
Accounting — An Information Process            Identification              of Users                 User             Infor...
Accounting — An Information Process                  Identification                    of Users                       User...
Accounting — An Information Process                  Identification                    of Users                       User...
Accounting — An Information Process                  Identification                    of Users                       User...
Users of Accounting Information                          •   investorsFinancial Accounting      •   creditors   EXTERNAL U...
Users of Accounting Information                          •   investorsFinancial Accounting      •   creditors    EXTERNAL ...
The Accounting ProfessionGovernment             Industry             CPA Firms                         Staff              ...
The Accounting ProfessionGovernment           Industry      CPA Firms                      Chief          SeniorSupervisor...
The Accounting ProfessionGovernment             Industry                CPA Firms  Director            Controller         ...
The Accounting ProfessionGovernment             Industry               CPA Firms                    Vice PresidentAdminist...
The Accounting Profession  Government              Industry               CPA Firms Administrator         Vice President  ...
The Accounting Equation        ResourcesWhat are an organization’s resources called?                                      ...
The Accounting Equation   Resources      =    Sources   Assets     Cost of          What are theresources used        sour...
The Accounting Equation   Resources      =   Sources                      Liabilities   Assets                       Owner...
Business Transactionsa. Chris Clark deposits $25,000 cash for NetSolutions.         ASSETS                      LIABILITIE...
Business Transactionsa. Chris Clark deposits $25,000 cash for NetSolutions.         ASSETS                      LIABILITIE...
Business Transactionsa. Chris Clark deposits $25,000 cash for NetSolutions.         ASSETS                      LIABILITIE...
Business Transactionsb. NetSolutions buys land for $20,000.         ASSETS                      LIABILITIES               ...
Business Transactionsb. NetSolutions buys land for $20,000.         ASSETS                      LIABILITIES           Cash...
Business Transactionsb. NetSolutions buys land for $20,000.         ASSETS                      LIABILITIES           Cash...
Business Transactionsc. NetSolutions buys supplies for $1,350, agreeing to   pay the supplier in the near future.         ...
Business Transactionsc. NetSolutions buys supplies for $1,350, agreeing to   pay the supplier in the near future.         ...
Business Transactionsc. NetSolutions buys supplies for $1,350, agreeing to   pay the supplier in the near future.         ...
Business Transactionsd. NetSolutions earns fees of $7,500, receiving cash.         ASSETS                       LIABILITIE...
Business Transactionsd. NetSolutions earns fees of $7,500, receiving cash.         ASSETS                       LIABILITIE...
Business Transactionsd. NetSolutions earns fees of $7,500, receiving cash.         ASSETS                       LIABILITIE...
Business Transactionse. NetSolutions paid: wages, $2,125; rent, $800;   utilities, $450; and miscellaneous, $275.         ...
Business Transactionse. NetSolutions paid: wages, $2,125; rent, $800;   utilities, $450; and miscellaneous, $275.         ...
Business Transactionse. NetSolutions paid: wages, $2,125; rent, $800;   utilities, $450; and miscellaneous, $275.         ...
Business Transactionsf. NetSolutions pays $950 to creditors on account.         ASSETS                     LIABILITIES    ...
Business Transactionsf. NetSolutions pays $950 to creditors on account.         ASSETS                     LIABILITIES    ...
Business Transactionsf. NetSolutions pays $950 to creditors on account.         ASSETS                     LIABILITIES    ...
Business Transactionsg. At the end of the month, the cost of supplies on   hand is $550.         ASSETS                   ...
Business Transactionsg. At the end of the month, the cost of supplies on   hand is $550.         ASSETS                   ...
Business Transactionsg. At the end of the month, the cost of supplies on   hand is $550.         ASSETS                   ...
Business Transactionsh. Chris Clark withdraws $2,000 in cash.         ASSETS                      LIABILITIES             ...
Business Transactionsh. Chris Clark withdraws $2,000 in cash.         ASSETS                      LIABILITIES           Ca...
Business Transactionsh. Chris Clark withdraws $2,000 in cash.         ASSETS                      LIABILITIES           Ca...
Transaction Summary     ASSETS                LIABILITIESCash         5,900       OWNER’S EQUITYSuppliesLand              ...
Transaction Summary     ASSETS                 LIABILITIES                         Accts. Payable 400Cash         5,900   ...
Transaction Summary     ASSETS                   LIABILITIES                           Accts. Payable 400Cash         5,90...
Effects of Transactions on Owner’s Equity               OWNER’S EQUITY                                            C1 - 46
Effects of Transactions on Owner’s Equity                  OWNER’S EQUITY       decreased by                              ...
Effects of Transactions on Owner’s Equity                    OWNER’S EQUITY        decreased by    Owner’s withdrawals    ...
Effects of Transactions on Owner’s Equity               OWNER’S EQUITY                          increased by              ...
Effects of Transactions on Owner’s Equity               OWNER’S EQUITY                          increased by              ...
Effects of Transactions on Owner’s Equity                    OWNER’S EQUITY        decreased by           increased by    ...
Effects of Transactions on Owner’s Equity                    OWNER’S EQUITY        decreased by             increased by  ...
Financial Statements                   NetSolutions                Income Statement      For the Month Ended November 30, ...
Financial Statements                   NetSolutions                Income Statement      For the Month Ended November 30, ...
Financial Statements                   NetSolutions                Income Statement      For the Month Ended November 30, ...
Financial Statements                   NetSolutions                Income Statement      For the Month Ended November 30, ...
Financial Statements                   NetSolutions            Statement of Owner’s Equity      For the Month Ended Novemb...
Financial Statements                   NetSolutions            Statement of Owner’s Equity      For the Month Ended Novemb...
Financial Statements                   NetSolutions            Statement of Owner’s Equity      For the Month Ended Novemb...
Financial Statements                   NetSolutions            Statement of Owner’s Equity      For the Month Ended Novemb...
Financial Statements                   NetSolutions            Statement of Owner’s Equity      For the Month Ended Novemb...
Financial Statements              NetSolutions              Balance Sheet            November 30, 2002           AssetsCas...
Financial Statements              NetSolutions              Balance Sheet            November 30, 2002           AssetsCas...
Financial Statements              NetSolutions              Balance Sheet            November 30, 2002           AssetsCas...
Financial Statements              NetSolutions              Balance Sheet            November 30, 2002           AssetsCas...
Financial Statements                      NetSolutions                 Statement of Cash Flows         For the Month Ended...
Financial Statements                      NetSolutions                 Statement of Cash Flows         For the Month Ended...
Financial Statements                      NetSolutions                 Statement of Cash Flows         For the Month Ended...
Financial Statements                      NetSolutions                 Statement of Cash Flows         For the Month Ended...
Ratio of Liabilities to Owner’s EquityObjective: Use the ratio of liabilities to owner’s equity toanalyze the ability of a...
Chapter 1             Power Notes    Introduction to Accounting and Business  This is the last slide in Chapter 1.     Not...
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01 - Introduction to Accounting and Business

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01 - Introduction to Accounting and Business

  1. 1. Chapter 1 Power Notes Introduction to Accounting and Business Learning Objectives 1. Nature of a Business 2. The Role of Accounting in Business 3. Business Ethics 4. Profession of Accounting 5. Generally Accepted Accounting Principles 6. Assets, Liabilities, and Owner’s Equity 7. Business Transactions 8. Financial Statements 9. Financial Analysis and Interpretation C1 C1 - 1
  2. 2. Chapter 1 Power Notes Introduction to Accounting and Business Slide # Power Note Topics 3 • Accounting – An Information Process 9 • Users of Accounting Information 11 • Profession of Accounting 16 • The Accounting Equation 19 • Business Transactions 53 • Financial Statements 70 • Ratio of Liabilities to Owner’s Equity Note: To select a topic, type the slide # and press Enter. C1 - 2
  3. 3. Accounting — An Information Process Identification of Users C1 - 3
  4. 4. Accounting — An Information Process Identification of Users User Information Needs C1 - 4
  5. 5. Accounting — An Information Process Identification of Users User Information Needs Accounting System C1 - 5
  6. 6. Accounting — An Information Process Identification of Users User Information NeedsEconomic Data Accounting and Activities System C1 - 6
  7. 7. Accounting — An Information Process Identification of Users User Information NeedsEconomic Data Accounting and Activities System Reports C1 - 7
  8. 8. Accounting — An Information Process Identification of Users User Information NeedsEconomic Data Accounting and Activities System User Reports Decisions C1 - 8
  9. 9. Users of Accounting Information • investorsFinancial Accounting • creditors EXTERNAL USERS • regulators • customers • competitors C1 - 9
  10. 10. Users of Accounting Information • investorsFinancial Accounting • creditors EXTERNAL USERS • regulators • customers • competitorsManagerial Accounting INTERNAL USERS • owners • managers • employees C1 - 10
  11. 11. The Accounting ProfessionGovernment Industry CPA Firms Staff Junior Auditor Accountant Accountant College GraduatesWhat are the starting rates for new graduates? C1 - 11
  12. 12. The Accounting ProfessionGovernment Industry CPA Firms Chief SeniorSupervisor Accountant Accountant Staff Junior Auditor Accountant Accountant College GraduatesHow soon would I get promoted? C1 - 12
  13. 13. The Accounting ProfessionGovernment Industry CPA Firms Director Controller Manager SeniorSupervisor Chief Accountant Accountant Staff Junior Auditor Accountant Accountant College GraduatesWhat are the top positions in each category? C1 - 13
  14. 14. The Accounting ProfessionGovernment Industry CPA Firms Vice PresidentAdministrator Finance Partner Director Manager Controller Senior Supervisor Chief Accountant Accountant Staff Junior Auditor Accountant Accountant College GraduatesWhat is the fastest path to top management? C1 - 14
  15. 15. The Accounting Profession Government Industry CPA Firms Administrator Vice President Partner Finance 1 2 Director Manager Controller Senior Supervisor Chief Accountant Accountant Staff Junior Auditor Accountant Accountant College Graduates1 10 to 20 years of experience 2 6 to 8 years of experience C1 - 15
  16. 16. The Accounting Equation ResourcesWhat are an organization’s resources called? C1 - 16
  17. 17. The Accounting Equation Resources = Sources Assets Cost of What are theresources used sources of thein the business assets? C1 - 17
  18. 18. The Accounting Equation Resources = Sources Liabilities Assets Owner’s Equity Cost of Resourcesresources used supplied byin the business creditors and owners C1 - 18
  19. 19. Business Transactionsa. Chris Clark deposits $25,000 cash for NetSolutions. ASSETS LIABILITIES = OWNER’S EQUITY C1 - 19
  20. 20. Business Transactionsa. Chris Clark deposits $25,000 cash for NetSolutions. ASSETS LIABILITIES Cash 25,000 = OWNER’S EQUITY C1 - 20
  21. 21. Business Transactionsa. Chris Clark deposits $25,000 cash for NetSolutions. ASSETS LIABILITIES Cash 25,000 = OWNER’S EQUITY Chris Clark, Capital 25,000 C1 - 21
  22. 22. Business Transactionsb. NetSolutions buys land for $20,000. ASSETS LIABILITIES = OWNER’S EQUITY C1 - 22
  23. 23. Business Transactionsb. NetSolutions buys land for $20,000. ASSETS LIABILITIES Cash (20,000) = OWNER’S EQUITY C1 - 23
  24. 24. Business Transactionsb. NetSolutions buys land for $20,000. ASSETS LIABILITIES Cash (20,000) = OWNER’S EQUITY Land 20,000 C1 - 24
  25. 25. Business Transactionsc. NetSolutions buys supplies for $1,350, agreeing to pay the supplier in the near future. ASSETS LIABILITIES = OWNER’S EQUITY C1 - 25
  26. 26. Business Transactionsc. NetSolutions buys supplies for $1,350, agreeing to pay the supplier in the near future. ASSETS LIABILITIES Supplies 1,350 = OWNER’S EQUITY C1 - 26
  27. 27. Business Transactionsc. NetSolutions buys supplies for $1,350, agreeing to pay the supplier in the near future. ASSETS LIABILITIES Accounts Payable 1,350 Supplies 1,350 = OWNER’S EQUITY C1 - 27
  28. 28. Business Transactionsd. NetSolutions earns fees of $7,500, receiving cash. ASSETS LIABILITIES = OWNER’S EQUITY C1 - 28
  29. 29. Business Transactionsd. NetSolutions earns fees of $7,500, receiving cash. ASSETS LIABILITIES Cash = 7,500 OWNER’S EQUITY C1 - 29
  30. 30. Business Transactionsd. NetSolutions earns fees of $7,500, receiving cash. ASSETS LIABILITIES Cash = 7,500 OWNER’S EQUITY Fees Earned 7,500 C1 - 30
  31. 31. Business Transactionse. NetSolutions paid: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275. ASSETS LIABILITIES = OWNER’S EQUITY C1 - 31
  32. 32. Business Transactionse. NetSolutions paid: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275. ASSETS LIABILITIES Cash = (3,650) OWNER’S EQUITY C1 - 32
  33. 33. Business Transactionse. NetSolutions paid: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275. ASSETS LIABILITIES Cash = (3,650) OWNER’S EQUITY Expenses (3,650) C1 - 33
  34. 34. Business Transactionsf. NetSolutions pays $950 to creditors on account. ASSETS LIABILITIES = OWNER’S EQUITY C1 - 34
  35. 35. Business Transactionsf. NetSolutions pays $950 to creditors on account. ASSETS LIABILITIES Cash = (950) OWNER’S EQUITY C1 - 35
  36. 36. Business Transactionsf. NetSolutions pays $950 to creditors on account. ASSETS LIABILITIES Accounts Payable (950) Cash = (950) OWNER’S EQUITY C1 - 36
  37. 37. Business Transactionsg. At the end of the month, the cost of supplies on hand is $550. ASSETS LIABILITIES = OWNER’S EQUITY C1 - 37
  38. 38. Business Transactionsg. At the end of the month, the cost of supplies on hand is $550. ASSETS LIABILITIES Supplies = (800) OWNER’S EQUITY C1 - 38
  39. 39. Business Transactionsg. At the end of the month, the cost of supplies on hand is $550. ASSETS LIABILITIES Supplies = (800) OWNER’S EQUITY Supplies Expense (800) C1 - 39
  40. 40. Business Transactionsh. Chris Clark withdraws $2,000 in cash. ASSETS LIABILITIES = OWNER’S EQUITY C1 - 40
  41. 41. Business Transactionsh. Chris Clark withdraws $2,000 in cash. ASSETS LIABILITIES Cash = (2,000) OWNER’S EQUITY C1 - 41
  42. 42. Business Transactionsh. Chris Clark withdraws $2,000 in cash. ASSETS LIABILITIES Cash = (2,000) OWNER’S EQUITY Chris Clark, Drawing (2,000) C1 - 42
  43. 43. Transaction Summary ASSETS LIABILITIESCash 5,900 OWNER’S EQUITYSuppliesLand 550 20,000 = C1 - 43
  44. 44. Transaction Summary ASSETS LIABILITIES Accts. Payable 400Cash 5,900 OWNER’S EQUITYSuppliesLand 550 20,000 = C1 - 44
  45. 45. Transaction Summary ASSETS LIABILITIES Accts. Payable 400Cash 5,900 OWNER’S EQUITYSuppliesLand 550 20,000 = C. Clark, Capital 25,000 C. Clark, Drawing (2,000) Fees Earned 7,500 Wages Expense (2,125) Rent Expense (800) Supplies Expense (800) Utilities Expense (450) Misc. Expense (275) C1 - 45
  46. 46. Effects of Transactions on Owner’s Equity OWNER’S EQUITY C1 - 46
  47. 47. Effects of Transactions on Owner’s Equity OWNER’S EQUITY decreased by C1 - 47
  48. 48. Effects of Transactions on Owner’s Equity OWNER’S EQUITY decreased by Owner’s withdrawals Expenses C1 - 48
  49. 49. Effects of Transactions on Owner’s Equity OWNER’S EQUITY increased by C1 - 49
  50. 50. Effects of Transactions on Owner’s Equity OWNER’S EQUITY increased by Owner’s investments Revenues C1 - 50
  51. 51. Effects of Transactions on Owner’s Equity OWNER’S EQUITY decreased by increased by Owner’s withdrawals Owner’s investments Expenses Revenues C1 - 51
  52. 52. Effects of Transactions on Owner’s Equity OWNER’S EQUITY decreased by increased by Owner’s withdrawals Owner’s investments Expenses Revenues NET INCOME C1 - 52
  53. 53. Financial Statements NetSolutions Income Statement For the Month Ended November 30, 2002Fees earned $7,500Operating expenses: Wages expense $2,125 Rent expense 800 Supplies expense 800 Utilities expense 450 Miscellaneous expense 275 Total operating expenses 4,450Net income $3,050 C1 - 53
  54. 54. Financial Statements NetSolutions Income Statement For the Month Ended November 30, 2002Fees earned $7,500Operating expenses: Wages expense $2,125 Rent expense 800 Supplies expense 800 Utilities expense 450 Miscellaneous expense 275 Total operating expenses 4,450Net income $3,050 C1 - 54
  55. 55. Financial Statements NetSolutions Income Statement For the Month Ended November 30, 2002Fees earned $7,500Operating expenses: Wages expense $2,125 Rent expense 800 Supplies expense 800 Utilities expense 450 Miscellaneous expense 275 Total operating expenses 4,450Net income $3,050 C1 - 55
  56. 56. Financial Statements NetSolutions Income Statement For the Month Ended November 30, 2002Fees earned $7,500Operating expenses: Wages expense $2,125 Rent expense 800 Supplies expense 800 Utilities expense 450 Miscellaneous expense 275 Total operating expenses 4,450Net income $3,050 C1 - 56
  57. 57. Financial Statements NetSolutions Statement of Owner’s Equity For the Month Ended November 30, 2002Chris Clark, capital, November 1, 2002 $ 0Investment on November 1, 2002 $25,000Net income for November 3,050 $28,050Less withdrawals 2,000Increase in owner’s equity 26,050Chris Clark, capital, November 30, 2002 $26,050 C1 - 57
  58. 58. Financial Statements NetSolutions Statement of Owner’s Equity For the Month Ended November 30, 2002Chris Clark, capital, November 1, 2002 $ 0Investment on November 1, 2002 $25,000Net income for November 3,050 $28,050Less withdrawals 2,000Increase in owner’s equity 26,050Chris Clark, capital, November 30, 2002 $26,050 C1 - 58
  59. 59. Financial Statements NetSolutions Statement of Owner’s Equity For the Month Ended November 30, 2002Chris Clark, capital, November 1, 2002 $ 0Investment on November 1, 2002 $25,000Net income for November 3,050 $28,050Less withdrawals 2,000Increase in owner’s equity 26,050Chris Clark, capital, November 30, 2002 $26,050 C1 - 59
  60. 60. Financial Statements NetSolutions Statement of Owner’s Equity For the Month Ended November 30, 2002Chris Clark, capital, November 1, 2002 $ 0Investment on November 1, 2002 $25,000Net income for November 3,050 $28,050Less withdrawals 2,000Increase in owner’s equity 26,050Chris Clark, capital, November 30, 2002 $26,050 C1 - 60
  61. 61. Financial Statements NetSolutions Statement of Owner’s Equity For the Month Ended November 30, 2002Chris Clark, capital, November 1, 2002 $ 0Investment on November 1, 2002 $25,000Net income for November 3,050 $28,050Less withdrawals 2,000Increase in owner’s equity 26,050Chris Clark, capital, November 30, 2002 $26,050 C1 - 61
  62. 62. Financial Statements NetSolutions Balance Sheet November 30, 2002 AssetsCash $5,900Supplies 550Land 20,000 Total assets $26,450 LiabilitiesAccounts payable $ 400 Owner’s EquityChris Clark, capital 26,050 Total liabilities and owner’s equity $26,450 C1 - 62
  63. 63. Financial Statements NetSolutions Balance Sheet November 30, 2002 AssetsCash $5,900Supplies 550Land 20,000 Total assets $26,450 LiabilitiesAccounts payable $ 400 Owner’s EquityChris Clark, capital 26,050 Total liabilities and owner’s equity $26,450 C1 - 63
  64. 64. Financial Statements NetSolutions Balance Sheet November 30, 2002 AssetsCash $5,900Supplies 550Land 20,000 Total assets $26,450 LiabilitiesAccounts payable $ 400 Owner’s EquityChris Clark, capital 26,050 Total liabilities and owner’s equity $26,450 C1 - 64
  65. 65. Financial Statements NetSolutions Balance Sheet November 30, 2002 AssetsCash $5,900Supplies 550Land 20,000 Total assets $26,450 LiabilitiesAccounts payable $ 400 Owner’s EquityChris Clark, capital 26,050 Total liabilities and owner’s equity $26,450 C1 - 65
  66. 66. Financial Statements NetSolutions Statement of Cash Flows For the Month Ended November 30, 2002Cash flows from operating activities: Cash received from customers $ 7,500 Deduct cash payments for expenses and payments to creditors 4,600 Net cash flow from operating activities $ 2,900Cash flows from investing activities: Cash payments for acquisition of land (20,000)Cash flows from financing activities: Cash received as owner’s investment $25,000 Deduct cash withdrawal by owner 2,000 Net cash flow from financing activities 23,000Net cash flow and Nov. 30, 2002 cash balance $5,900 C1 - 66
  67. 67. Financial Statements NetSolutions Statement of Cash Flows For the Month Ended November 30, 2002Cash flows from operating activities: Cash received from customers $ 7,500 Deduct cash payments for expenses and payments to creditors 4,600 Net cash flow from operating activities $ 2,900Cash flows from investing activities: Cash payments for acquisition of land (20,000 )Cash flows from financing activities: Cash received as owner’s investment $25,000 Deduct cash withdrawal by owner 2,000 Net cash flow from financing activities 23,000Net cash flow and Nov. 30, 2002 cash balance $5,900 C1 - 67
  68. 68. Financial Statements NetSolutions Statement of Cash Flows For the Month Ended November 30, 2002Cash flows from operating activities: Cash received from customers $ 7,500 Deduct cash payments for expenses and payments to creditors 4,600 Net cash flow from operating activities $ 2,900Cash flows from investing activities: Cash payments for acquisition of land ) (20,000)Cash flows from financing activities: Cash received as owner’s investment $25,000 Deduct cash withdrawal by owner 2,000 Net cash flow from financing activities 23,000Net cash flow and Nov. 30, 2002 cash balance $5,900 C1 - 68
  69. 69. Financial Statements NetSolutions Statement of Cash Flows For the Month Ended November 30, 2002Cash flows from operating activities: Cash received from customers $ 7,500 Deduct cash payments for expenses and payments to creditors 4,600 Net cash flow from operating activities $ 2,900Cash flows from investing activities: Cash payments for acquisition of land (20,000 )Cash flows from financing activities: Cash received as owner’s investment $25,000 Deduct cash withdrawal by owner 2,000 Net cash flow from financing activities 23,000Net cash flow and Nov. 30, 2002 cash balance $5,900 C1 - 69
  70. 70. Ratio of Liabilities to Owner’s EquityObjective: Use the ratio of liabilities to owner’s equity toanalyze the ability of a business to withstand poorbusiness conditions and to pay its creditors. Formula Ratio of liabilities Total liabilities to owner’s equity = Total owner’s equity Example NetSolutions $400 $16,050 = .025 or 2.5% C1 - 70
  71. 71. Chapter 1 Power Notes Introduction to Accounting and Business This is the last slide in Chapter 1. Note: To see the topic slide, type 2 and press Enter. C1 - 71

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