1、Why do we learn Accounting English? What are the learning objectives of Accounting English? Is Accounting English difficult?,CHAPTER 1,ACCOUNTING: THE BASIS FOR DECISIONS,Learning Objectives,Explain the definition of accounting; Understand the basic function of accounting; Understand the types of ac

2、counting information; Ascertain the users of accounting information and know why they need the information; Have a general idea of the professional fields of accounting and their duties.,Definition of Accounting,Accounting is an information system designed to record, classify and summarize systemati

3、cally significant financial and other economic information about business firms, and analyses and interprets its results, with monetary unit as its main criterion.,Different expresses about “ 企業(yè)” in English Business Enterprise Firm Accounting 會計（學(xué)） Accountant 會計師 Bean Counter,Accounting: Information

4、 for Decision Making,The primary objective of accounting is to provide information that is useful for making decisions. Types of accounting Financial Accounting Management Accounting Tax Accounting,Financial Accounting,Financial position 財務(wù)狀況 Result of operation 經(jīng)營成果 Income tax returns 納稅申報 Question

5、: Whats the purpose of financial accounting?,Management Accounting,Bank account 銀行賬戶 Owe to 欠債 Question: Whats the purpose of management accounting?,Tax Accounting,Prepare 編制 Confirm to/with 與相一致 Question: What functions does tax accounting encompass?,External users,Internal users,Users of Accountin

6、g Information,Internal users of accounting information,Question: How to define internal users of accounting information? Who are internal users of accounting information?,Internal users of accounting information,Mature = be due v.到期 Maturity n.到期 Meet = pay off 償還 Inventory 存貨 Expense 費用 Revenue 收入

7、Earnings = profits 利潤,Internal users of accounting information,Question: Which decisions are to be made by internal users ?,External users of accounting information,Warranty obligations 保證責(zé)任 Question: How to define external users of accounting information? Who are external users of accounting inform

8、ation? And who are the two primary external users of accounting information? Which decisions are to be made by external users ?,Objectives of External Financial Reporting,Wholesale houses 批發(fā)商 Debt-paying ability 償債能力 Return on investment 投資回報 Return of investment 投資回收 練習(xí)：P13 Exercises 1,Profession F

9、ields of Accounting,private accounting,public accounting,accounting for governments and nonprofit organization,Public Accounting,CPA (Certificated Public Accountants) CPA firm 普華永道(Price Waterhouse Coopers，PwC) 安永(Ernst Have a general idea of the complete accounting process; Understand the rules of

10、double-entry accounting; Learn the accounting terms in this chapter and use them in the translation task.,Definition of accounting cycle Steps of accounting cycle A transaction is any event that both affects the financial position of the business and can be reliably recorded.,Understand how double-e

11、ntry accounting works,Accounting equation,Assets = Liabilities + Owners equity,T-account,T-account: a simplest form of an account, used to help illustrate the effect of transaction.,Account name,Debit entries (left side),Credit entries (right side),Debit n. 借,借方,借記 Debit card 借記卡 v. 計入借方,借計 Debit an

12、 account 計入借方賬 Credit n. 貸,貸方,貸記 Credit card 貸記卡 v. 計入貸方,貸計 Credit an account 計入貸方賬,Owners Equity,Assets,Liabilities,Debit +,Debit ,Credit ,Debit ,Credit +,Credit +,=,+,rules of debits &credits,The type of account determines the side on which increases and decreases are recorded.,* The rules of debi

13、ts and credits keep the accounting equation in balance.,Debits,Credits,Revenue accounts Decrease (-) Increase (+) Expense accounts Increase (+) Decrease (-),Income Statement Accounts,Double-Entry Accounting,“ Double-entry accounting is based on a simple concept: each party in a business transaction

14、will receive something and give something in return. In bookkeeping terms, what is received is a debit and what is given is a credit. The T account is a representation of a scale or balance.”,Luca Pacioli Developer of Double-Entry Accounting,Scale or Balance,Receive DEBIT,Give CREDIT,T account,Left

15、Side Receive DEBIT,Right Side Give CREDIT,Double-entry accounting means to record the dual effects of each business transaction. Single entry accounting,The Double-Entry System,1.Each transaction affects at least two accounts.,2. Total debits must equal total credits.,Rules of The Double-Entry Syste

16、m,Record transactions in the journal,Journal,What is a journal? It is a record of each business transaction in a chronological order. steps: Identify transaction from source documents. Specify accounts affected. Apply debit/credit rules. Record transaction with description.,Why not record transactio

17、n directly in the ledger? Omitting the debit or credit Entering the debit or credit twice,Journal classification,General journal-to record all kinds transactions Special journal-to record a certain kind transactions,Journal format,What does a journal include? date of the transaction title of the acc

18、ount description of the transaction reference debit credit,Post from the journal to the ledger,What is posting? Posting is the process that debits and credits are transferred from the journal to the ledger accounts. What is a ledger? A book of accounts What is an account? A record based on the items

19、 of accounting elements, representing an increase or a decrease and the result of those items.,It classifies the effects of business transactions in terms of specific assets, liabilities, and owners equity accounts. In the process, each amount in the debit column of the journal is posted by entering

20、 it on the debit side of an ledger account, and each amount in the credit column of the journal is posted by entering it on the credit side of an ledger account.,1 2 3 4,Prepaid Insurance 2 400 00,Cash 2 400 00,Paid premium on two-year policy.,Dec. 1 NetSolutions paid a premium of $2,400 for a compr

21、ehensive insurance policy covering two years.,1 2 3 4,Prepaid Insurance 2 400 00,Cash 2 400 00,ACCOUNT,Prepaid Insurance,ACCOUNT NO. 15,Balance,Debit,Credit,Date,Debit,Credit,Item,Post. Ref.,2 400 00,2 400 00,Paid premium on two-year policy.,1 2 3 4,Prepaid Insurance 2 400 00,Cash 2 400 00,ACCOUNT,P

22、repaid Insurance,ACCOUNT NO. 15,Balance,Debit,Credit,Date,Debit,Credit,Item,Post. Ref.,2 400 00,2 400 00,2,15,Paid premium on two-year policy.,ACCOUNT,Cash,ACCOUNT NO. 11,Balance,Debit,Credit,Date,Debit,Credit,Item,Post. Ref.,2 000 00,5 900 00,2,Dec. 1,2 400 00,3 500 00,ACCOUNT,Cash,ACCOUNT NO. 11,B

23、alance,Debit,Credit,Date,Debit,Credit,Item,Post. Ref.,2 000 00,5 900 00,2,2 400 00,3 500 00,Dec. 1,11,2,Classification of Ledgers,Ledgers are created on the basis of the item of financial statements. General ledger It contains all of the balance sheet and income statement accounts. Subsidiary ledger

24、 A separate record created to record the individual items relating to a single general ledger account.,A summerizing account Balance,Relationship between general ledger & subsidiary ledger,Difference between journal &ledger,Journal: a chronological record of all the transactions for a business. Ledg

25、er: a book of accounts.,Prepare a trial balance,Trial Balance,What is a trial balance? A worksheet listing the names and balances of all the accounts in the order which they appear in the general ledger. Format of a trial balance,NetSolutions Trial Balance December 31, 2005,Cash 2 065 00 Accounts Re

26、ceivable 2 220 00 Supplies 2 000 00 Prepaid Insurance 2 400 00 Land 20 000 00 Office Equipment 1 800 00 Accounts Payable 900 00 Unearned Rent 360 00 Chris Clark, Capital 25 000 00 Chris Clark, Drawing 4 000 00 Fees Earned 16 340 00 Wages Expense 4 275 00 Rent Expense 1 600 00 Utilities Expense 985 0

27、0 Supplies Expense 800 00 Miscellaneous Expense 455 00 42 600 00 42 600 00,NetSolutions Trial Balance December 31, 2005,Cash 2 065 00 Accounts Receivable 2 220 00 Supplies 2 000 00 Prepaid Insurance 2 400 00 Land 20 000 00 Office Equipment 1 800 00 Accounts Payable 900 00 Unearned Rent 360 00 Chris

28、Clark, Capital 25 000 00 Chris Clark, Drawing 4 000 00 Fees Earned 16 340 00 Wages Expense 4 275 00 Rent Expense 1 600 00 Utilities Expense 985 00 Supplies Expense 800 00 Miscellaneous Expense 455 00 42 600 00 42 600 00,Balance Sheet Items,NetSolutions Trial Balance December 31, 2005,Cash 2 065 00 A

29、ccounts Receivable 2 220 00 Supplies 2 000 00 Prepaid Insurance 2 400 00 Land 20 000 00 Office Equipment 1 800 00 Accounts Payable 900 00 Unearned Rent 360 00 Chris Clark, Capital 25 000 00 Chris Clark, Drawing 4 000 00 Fees Earned 16 340 00 Wages Expense 4 275 00 Rent Expense 1 600 00 Utilities Exp

30、ense 985 00 Supplies Expense 800 00 Miscellaneous Expense 455 00 42 600 00 42 600 00,Statement of Owners Equity Item,NetSolutions Trial Balance December 31, 2005,Cash 2 065 00 Accounts Receivable 2 220 00 Supplies 2 000 00 Prepaid Insurance 2 400 00 Land 20 000 00 Office Equipment 1 800 00 Accounts

31、Payable 900 00 Unearned Rent 360 00 Chris Clark, Capital 25 000 00 Chris Clark, Drawing 4 000 00 Fees Earned 16 340 00 Wages Expense 4 275 00 Rent Expense 1 600 00 Utilities Expense 985 00 Supplies Expense 800 00 Miscellaneous Expense 455 00 42 600 00 42 600 00,Income Statement Items,Why to prepare

32、the trial balance? What reasons can cause errors during posting?,Errors,1. Failure to record a transaction or to post a transaction. 2. Recording the same erroneous amount for both the debit and the credit parts of a transaction. 3. Recording the same transaction more than once. 4. Posting a part of

33、 a transaction correctly as a debit or credit but to the wrong account.,Errors that will not cause the trial balance to be unequal:,End-of-period Adjusting Entries,Why should adjusting entries be made?,Types of adjusting entries Accruals: for revenues and expenses that are matched to the dates befor

34、e the transaction have been recorded Accrued Revenues Accrued Expenses Defferals: for revenues and expenses that are matched to the dates after the transaction have been recorded Unearned Revenues Prepaid Expenses,Do adjusting entries go directly to the relative ledger accounts?,Work Sheet,Why to pr

35、epare work sheet?,Work sheet includes unadjusted trial balance, adjusting entries, adjusted trial balance, and income statement and balance sheet (with a Dr. column and a Cr. column each).,Closing Entries,Classification of accounts Balance sheet accounts-Permanent ( real )accounts Income statement a

36、ccounts-Temporary (nominal) accounts Close sth to sth Transfer sth to sth,The aim of making closing entries,Prepare financial statements,CHAPER 4,BASIC FINANCIAL STATEMENTS,Financial statements, called accounting reports, provide information about profitability and financial position of a business t

37、o the management and the interested outsider., are the final product of the accounting process., reflect the financial position and operating results of the business.,Financial Statements.,The balance sheet (or statement of financial position) The income statement (or profit and loss statement) The

38、statement of cash flows,Companies present at least three major financial statements:,Financial Statements,Balance Sheet,The balance sheet reports a companys financial position as of (at) a point in time.,What is financial condition?,Balance sheets three major categories,Assets the economic resources

39、 of the firm Liabilities the debts of the firm Owners equity the owners interest in the firm,Economic Resources,Claims to Economic Resources,Accounting Equation,Assets,=,Liabilities + Owners Equity,Accounting Equation,The rights of creditors,The rights of the stockholders,report form: the balance sh

40、eet displays the assets on the top, and below it are liabilities and owners equity in that order.,account form: the balance sheet presents assets on the left column and liabilities and owners equity on the right column.,An Example of Balance Sheet (account form),Assets Cash $ 20,000 Accounts receiva

41、ble 2,000 Supplies 500 Land 11,000 Total assets $ 33,500,Liabilities and Stockholders Equity Liabilities Accounts payable $ 200 Stockholders equity Capital stock 20,000 Retained earnings 13,300 Total liabilities and owners equity $33,500,Assets,Classification of assets Current / short-term assets No

42、n-current / long-term assets Definition of current assets are expected to be converted to cash or sold or used up within one year or less than the normal course of the entitys operating cycle. Main components of current assets Cash, cash equivalents, accounts receivables, inventories, marketable sec

43、urities, prepaid items,Definition of fixed assets have relatively permanent usage character and are used in normal business operations. Main components of fixed assets Equipment, machinery, building, and land Definition of intangible assets refer to long-term assets that do not have physical attribu

44、tes and are held for use in operation but not for sale. Main components of intangible assets Patent rights, copy rights, and goodwill,Liabilities,Classification of liabilities Current liabilities Long-term liabilities,Liabilities,Definition of current liabilities Liabilities are due within a short t

45、ime (usually one year or less than the normal course of the entitys operating cycle) and are to be paid out of current assets. Main components of current liabilities Accounts payable, notes payable, other payables, short-term loan, received unearned revenue, the long-term debts that will be due with

46、in one year,Liabilities,Definition of Long-term liabilities Liabilities are due for a long time (usually more than one year) Main components of Long-term liabilities Long-term loan, long-term bonds, and long-term payable,Owners equity,Owners equity presents the interest of the ownership group in the

47、 net resource of the enterprise, which arises from investments by owners, and will increase or decrease with the change of operation results.,Owners equity,Paid-in capital or Contributed capital,Retained earnings,Owners equity in the corporation has two components:,Owners equity,Paid-in capital (or

48、contributed capital) is the amount that stockholders have contributed to the corporation. Capital stock: common stock and preferred stock Additional paid-in capital Retained earnings is the amount of net income not paid to stockholders as dividend. (reinvestment),Owners equity,In our country, owners

49、 equity includes capital、capital reserve、surplus reserve、undistributed profits。,Income Statement,An income statement is a summary of the revenue and the expenses for a specific period of time, usually a month or a year.,Reports change in financial condition,Components of Income Statement,Revenue inc

50、reases in net assets resulting from an entitys operation over a period of time. Expenses - decreases in net assets resulting from an entitys operation over a period of time. Net Income - the excess of revenue over expenses. Net Loss - the excess of expenses over revenue.,The Forms of Income Statemen

51、t,Single-step form-It gathers all the revenue together , then deducts all the expenses from the revenue to get net income. Multiple-step form-It presents gross profits, operating income, operating income before taxes, and net income.,Retained Earnings Statement,The retained earnings statement shows

52、changes in retained earnings balance during period covered by statement.,Objective:,Reports change in financial condition,Most firms report a statement of owners equity, which is more comprehensive than a statement of retained earnings.,Statement of Owners Equity,Reflects operating performance of th

53、e firm. Reports changes in all categories of owners equity (following the sequence of equity on balance sheet) during the period. Indicates amount invested by owners, amount paid out in dividends, and amount of net income or net loss for period.,Role of Statement of Owners Equity,The equity item in

54、a sole proprietorship is often reported by giving the proprietors name, followed by the word “capital”. For example, Mary Green is the proprietor of Greens Market. Greens Market has total equity of $10,000. Then the owners equity item would be reported as follows: Mary Green, capital $ 10,000,In a p

55、artnership, the equity of each partner would shown separately. For example, John Black and Henry Brown are equal partners in a laundry business. On December 31, the equity in the business totaled $100,000. The equity might be reported on that date as following: John Black, capital $ 50,000 Henry Bro

56、wn, capital $ 50,000 Total equity $ 100,000,G. Gillen, capital, Contributed capital $30,000 Net income $ 5,400 Cash distributions 2,100 G. Gillen, capital, Dec. 31, 20 xx $33,300,Statement of Owners Equity Example,Statement of Stockholders Equity Example,Additional Common Paid-in Retained Stock Capi

57、tal Earnings Balance, December 31, 20 x4 $ 80,000 $160,000 $130,000 Issuance of stock 20,000 65,000 Net income 69,000 Cash dividends (21,000) Stock dividends 8% 8,000 26,000 (34,000) Purchase of treasury stock Sale of treasury stock 13,000 Balance, December 31, 20 x5 $108,000 $264,000 $144,000,Footn

58、otes (notes) to Financial Statements,They are explanatory to related items in the financial statements. They provide additional information not included in body of statements. The aim is to meet the needs to understand the contents of the statements. It does not have to be numeric.,Footnotes (notes) to Financial Statements,Examples: Description of accounting policies, such as d