1、,General View of Accounting,CHAPTER 1,Introduction of accounting,* One of the oldest professions,* Participated in the development of nations, trade, finance, money and banking,* Double-entry bookkeeping fueled the Renaissance,Introduction of accounting,Luca Pacioli (1445-1517),Summa di Arithmetica,

2、treatise on book-keeping,People have understood accounting on a scientific principle in Italy,Introduction of accounting,John Gough, 1543,The first known English book on accounting,Introduction of accounting,The first public recognition of accountants,A Bankruptcy Act,In 1831,It mentions accountants

3、 alongside merchants and bankers as properly skilled to conduct audits.,Introduction of accounting,Management accounting,World War One (1914-1918),Accountants assist in the control of costs in relation to the production of ammunitions: bullets, bombs, explosives, etc.,Introduction of accounting,Afte

4、r the Second World War,Development of accounting,Enron financial scandal,In August 2002, the Sarbanes-Oxley Act is passed in the United States.,Accounting Definition,Accounting,Bookkeeping,It is the means of recording transactions and keeping records.,Accounting,Bookkeeping,Bookkeeping is the day-to

5、-day record-keeping involved in the process of accounting.,Accounting Definition,Accounting,Accurate financial reports,Useful to managers, regulators, and shareholders, creditors or owners,Accounting Definition,Major goal of accounting,Analysis,Interpretation,Use of information,Accounting Definition

6、,The American Institute of Certified Public Accountants,“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.”,(AICPA),Early definitions o

7、f accounting focused on the traditional record-keeping functions of the accountant.,Accounting Definition,The modern definition of accounting,It is defined as an information system that measures, processes, and communicates financial information about an identifiable economic entity.,Encyclopedia,Ac

8、counting is defined as the process of maintaining, auditing, and processing financial information for business purposes.,Accounting Definition,The modern accountant,record-keeping,Planning and problem solving Evaluation Review and Auditing,Accounting Definition,Business activities,Accounting,Data,Us

9、eful information,Decision makers,The Users of Accounting Information,Users,those who have a direct interest in the business including management;,2. those who have indirect interest in the business.,Users with Direct Financial Interest,Present and Potential Investors,Present and Potential Creditors,

10、Management,Management,Management,Management is the group in a business who has overall responsibility for operating the business and for achieving the business goals.,In a small business Owners of the business,In a large business Hired managers,Major function of accounting,To provide management with

11、 relevant and useful information,Such as: what was the companys net income during the past year? What products are most profitable? What is the cost of manufacturing each product?,Management,Present and Potential Investors,They are interested in the past success of the business and its potential ear

12、nings in the future.,Operating results of business,Profit sharing policy,Make decisions,Whether to increase, or decrease investments,Present and Potential Creditors,They are interested in whether the company will have the cash to pay the interest and repay the debt at fixed time.,Banks,Finance compa

13、nies,Mortgage companies,Securities firms,Insurance firms,Suppliers,Individuals,Users with Indirect Financial Interest,Tax Authorities,Other Groups,Tax Authorities,Tax authorities dont have direct financial interest in the company, but they usually analyze the tax status undertaken by a business to e

14、stablish tax policy.,Governments,Income taxes Social security Payroll taxes Excise taxes Sales taxes,Each tax requires special tax returns and often a complex set of records as well.,Other Groups,They advise investors and creditors and have an Indirect interest in the financial performance of a busi

15、ness.,Financial analysts and advisers,brokers,lawyers,economists,the financial press,Other Groups,Customers,The general public,They are concerned about the operating results, the effects that corporations have on inflation, the environment, social problems, and the quality of life.,Other Group,Accou

16、nting Profession,Public Accounting,Government Accounting,Internal Auditing,Management Accounting,Public Accountants,Certified Public Accountants,The Work of Public Accountants,Work for their own compay Work for other accouting firms provide accounting services to individuals, businesses, and governm

17、ents Concentrate on tax matters Specialize in forensic accounting,Government Accountants,work for the local or state level,The Work of Government Accountants,Keep and examine the records of government units administer and formulate budgets, to track costs and to analyze programs They must follow spe

18、cial procedures and regulations and reports for government officials,Management Accountants,work in companies and help the Management make decisions,Work of Management Accoutants,Provide the management advice about capital budgeting and business analysis Record and analyze the financial accounting i

19、nformation, market share, competition, and expansion opportunities of the company,Internal Auditors,check accounting ledgers and financial statements within companies,Work of Internal Auditors,Take training to keep skills up to date. Create and develop auditing systems for companies or agencies. Con

20、duct research to learn auditing needs for companies or individuals. Determine and record the value of real property. Analyze the financial data and records to ensure that they comply with legal and financial standards.,WE ARE SAILING RIGHT ALONG!,熱血 灑向哪里 青春都會落幕 來吧 灑在這里 反正一起上路,Forms of Business Organ

21、ization,CHAPTER 2,Forms of Business Organization,*Sole proprietorship,*Partnerships,*Corporations,Accountants should recognize each form as an economic unit separate from its owners.,Legally only the corporation is considered separate from its owners.,Simplest form of accounting,In this book, we onl

22、y show accounting for the sole proprietorship.,Sole Proprietorship,Sole Proprietorship,Sole Proprietorship,A business owned by one person is called a sole proprietorship or a single proprietorship.,Retail industry,Handicrafts,Agriculture,Forestry,Fishery,Other service and family workshops,The sole p

23、roprietorship is prevalent in:,Sole Proprietorship,Personal affair,Business affair,single proprietorship,From the viewpoint of all legal rights and responsibilities, your sole proprietorship business and you are considered to be one and the same.,Sole Proprietorship,The owner directs business activi

24、ties and may supply all management and labor used by the business.,Sole Proprietorship,Profits,Losses,Sole Proprietorship,For business and financial management purposes, it is better to maintain completely separate records for the business and the household.,Bank accounts Credit arrangements,Busines

25、s affair,Family affair,Sole Proprietorship,Advantages of Sole Proprietorship,Simplicity,Flexibility,A sole proprietorship can be set up, modified, bought, sold or terminated very quickly.,The proprietor can change the size and management of the business unit, as he or she desires at any time. The in

26、volvement of family members in the business is relatively unrestricted.,Sole Proprietorship,Limitations of Sole Proprietorship,Unlimited liability,Limited access to capital and business opportunities,Problem of continuity,Difficult to measure business financial performance, profitability and loss of

27、 equity,Partnerships,Partnership,Partnerships,Partnerships are set up by the owners who wish to combine capital or managerial talents for some common business purpose.,In accounting, partnerships are considered as separate entities from the owners.,Partnerships,Partner,Partner,Partner,Profits Losses

28、,Partnerships,Partnership,General partnership,Limited partnership,Most partnerships are organized as general partnerships.,written partnership agreement,The partnership agreements in a limited partnership must be registered with the government.,General partnership,Limited partnership,Public notice o

29、f the partnership agreement is not required.,Partnerships,Partnerships,Partnership agreement,It must contain the method how to distribute profits and losses to each owner.,Partner A,Profits Losses,Partner B,Partner C,30%,40%,30%,30%,40%,30%,Partnerships,Profits,Losses,If the agreement describes the

30、method of distributing the profits but does not mention the losses, the losses are distributed in the same way as profits.,If the agreement doesnt describe the method of distributing the profits and losses, the profits and losses must be shared equally.,Partnership agreement,Partnerships,Advantages

31、of Partnerships,Easier to assemble financial and physical resources,Specialize in management and operations according to the partners skills and interests,The limited partners have limited liability,Better access to capital and credit,Simple record-keeping and income tax filing requirements,Relative

32、ly unlimited opportunities for family members to work together in starting or operating a business,Partnerships,Limitations of Partnerships,Unlimited liability -General partner,No overall understanding of the financial position of the partnership.,limited life-withdraws, goes bankrupt, dies or retir

33、es,Partners holding a minority interest can be alienated The interests of minority partners may be ignored.,Corporations,Corporations,Corporations,A corporation is a big company, or a group of companies acting as a single organization.,A corporation, chartered by the state in which it is headquarter

34、ed, is considered by law to be a unique entity, separate and apart from those who own it.,Corporations,Cash or other resources,Share,Stockholder,Corporation,Corporations,Shareholders,Elect,Board of directors,Decide on the major business policies, authorizes contracts, determines on executive salarie

35、s and arranges major loans with banks.,Declaration of dividends,Corporations,Board of directors,Several officers of the corporation and several outsiders,Appoint,Managers,Execute the companys policies and carry out day-to-day operations.,Corporations,Management,Report the financial results,Board of

36、directors,Report the financial results,Shareholders,President, vice presidents, controller, treasurer, and secretary,Corporations,Advantages of Corporations,Continuous life,Separate legal entity,Limited liability,Ease of capital generation,Lack of mutual agency,Centralized authority and responsibili

37、ty,Professional management,Limitations of Corporations,Corporations,High organizing costs,Internal conflicts,Restrictions on the sale of stock,More paperwork to prepare,Double taxation,Negative influence of the requisition of personal guarantees from corporate officers as a condition of supplying cr

38、edit,天行健，君子以自強不息； 地勢坤，君子以厚德載物! WE ARE SAILING RIGHT ALONG!,Accounting Equation and Illustration,CHAPTER 3,In this box, there are many chalks and the claim on these chalks.,Accounting Equation,Value of these chalks,Value of the claims on chalks,Accounting Equation,Business,Economic resources,Economic

39、 resources,Equities,Another term for claims is equities.,Accounting Equation,Economic resources,Owners,Creditors,Comes from,Owners equity,Creditors equity,Accounting Equation,Economic resources,Owners equity,Creditors equity,In accounting, the term for economic resources is assets and creditors equi

40、ty is liabilities, the equation is described as follows:,Assets,Owners equity,Liability,IASB defines assets as resources controlled by the enterprise as a result of past events and from which economic benefits are expected to flow to the enterprise.,Assets,Assets,Assets are the economic resources ow

41、ned or controlled by a business that can benefit future operations for the business.,ASSETS,Current assets,Long-term assets,The examples for assets are cash, inventory, notes receivable, accounts receivable, prepaid expenses, land, buildings, and equipment and so on.,Assets,Liabilities,IASB defines

42、liabilities as present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits.,Liabilities,Liabilities are those debts arising from the past transactions and should be paid by pro

43、viding goods or services in the future.,Liabilities,Short-term Liabilities (current liabilities),Long-term Liabilities,Liabilities,Liabilities,Amount owed to creditors for goods or services bought on credit,Borrowed money,Salaries and wages owed to employees,Taxes owed to the government,Current liab

44、ilities are those amounts which are repayable within a period of less than 12 months or within an accounting cycle such as notes payable, and accounts receivable.,Non-current are those which should be repaid after more than 12 months or longer than an accounting cycle, such as bonds payable, mortgag

45、es payable.,Liabilities,Owners equity,Owners equity refers to the claims by the owner on the net assets of the business.,Assets,Owners equity,Liability,Owners equity,Business Account,Cash or other resources,Owner,The business assets increases, and owners equity in those assets also increase.,Busines

46、s Account,Owners equity,Cash or other resources,Owner,The assets decreases and owners equity also decreases.,Owners equity,Owners equity,Increase,Decrease,Expenses incurred,Revenues earned,Owners equity,Revenues,Expenses,Revenues,Expenses,Net income,Revenues,Expenses,Revenues,Expenses,Net loss,Illus

47、trative Transactions,Now, Let us analyze the effects of some typical transactions.,Illustrative Transactions,Suppose George Ross opens a photocopy company called George Ross Photocopy Company on June 1. During June, his business engages in the transactions described in the following pages.,Illustrat

48、ive Transactions,Owners Investment,George takes $10,000 out of his own personal account to opens his company.,Investment,Illustrative Transactions,The investment increases assets (Cash) and owners equity (George Ross, Capital).,Assets = Liabilities + Owners equity,1. $10,000 $10,000,Illustrative Tra

49、nsactions,Purchasing Assets with Cash,The company purchased paper and stationary for $800 and a computer for $4,000.,This transaction decreasing cash and increasing office supplies and office equipment.,Illustrative Transactions,Assets = Liabilities + Owners equity,$10,000 $10,000,2. +$800 (office s

50、upplies),+$4,000 (office equipment),-$4,800 (cash),bal. $10,000 $10,000,Illustrative Transactions,Purchasing Assets by Incurring a Liability,Suppose George bought photocopy equipment on credit for $1,500.,This transaction increases the assetsequipment and increases the liabilities of this agency.,Il

51、lustrative Transactions,Assets = Liabilities + Owners equity,$10,000 $10,000,+1,500 (photocopy equipment) $1,500 (accounts payable),bal.11,500 1,500 10,000,Illustrative Transactions,Paying a Liability,If George later pays $1,500 owed for the equipment, both assets (Cash) and liabilities (Accounts Pa

52、yable) will decrease, but equipment will be unaffected.,The accounting equation is still in balance after this transaction.,Illustrative Transactions,Assets = Liabilities + Owners equity,$11,500 $1,500 $10,000,4.-1,500 (cash) -1,500 (accounts payable),bal. $10,000 $10,000,Illustrative Transactions,E

53、arning Revenues,Suppose that the business performed a service by printing throwaways for a garment dealer and collected a fee of $3,000.,After this transaction, the assets and owners equity of George Ross Photocopy both increase.,Illustrative Transactions,Assets = Liabilities + Owners equity,$10,000

54、 $10,000,5. +3,000 (cash) +3,000 (photocopy),bal. 13,000 13,000 fees earned ),Illustrative Transactions,Now assume that George provides a big service calling for a fee of $2,500 and George agrees to wait for the payment.,This transaction increases both assets (Accounts Receivable) and owners equity.

55、 Although money isnt collected now, the revenue has been earned.,Illustrative Transactions,Assets = Liabilities + Owners equity,$13,000 $13,000,+2,500 (accounts receivable) +2,500 (photocopy fees earned),bal. 15,500 15,500,Illustrative Transactions,Collecting Accounts Receivable,If it is assumed tha

56、t a month later George receives $2,500 from the client in transaction 6, the asset Cash is increased and the asset Accounts Receivable is decreased.,Illustrative Transactions,Assets = Liabilities + Owners equity,$15,500 $15,500,7. +2,500 (cash),-2,500 (accounts receivable),bal. 15,500 15,500,Illustr

57、ative Transactions,Paying Expenses,Suppose that the agency paid $600 to a secretary for the first two weeks wages.,This transaction decreases assets (Cash) and owners equity.,Illustrative Transactions,Assets = Liabilities + Owners equity,$15,500 $15,500,600 (cash) -600 (office wages expense),bal. 14

58、,900 14,900,Illustrative Transactions,Withdrawing Money from Business,George withdraws $800 from business account to pay for personal living expenses.,This transaction decreases the assets and owners equity of the company.,Illustrative Transactions,Assets = Liabilities + Owners equity,$14,900 $14,900,9. 800 (cash) -800 (withdrawal),bal. 14,100 14,100,WE ARE SAILING RIGHT ALONG!,Accoun