FINANCIAL ACCOUNTING ACTG 3000 Presented by Charles Kile, Ph.D. Professor of Accounting Middle...
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Transcript of FINANCIAL ACCOUNTING ACTG 3000 Presented by Charles Kile, Ph.D. Professor of Accounting Middle...
FINANCIAL
ACCOUNTING
ACTG 3000
Presented by Charles Kile, Ph.D.
Professor of AccountingMiddle Tennessee State University
Purpose of the Course
• The name of this course is Survey of Accounting.
• The purpose of this course is not to make an accountant out of you.
Purpose of the Course• The purpose of this course is to
prepare students for interacting with accountants and accounting systems. The course intends to help students gain insight into the accounting systems that companies use and the reports that are generated by such systems
My Description of Accounting
• Accounting is a Measure.
• Accounting also sets procedures
over how resources can be used.
ACCOUNTING &RESOURCE ALLOCATION
• Part of a greater overall process for
helping to determine resource
allocation-
• who makes decisions over
resources.
• What do they do with those
resources?
The Financial Statements
• Income Statement
•Balance Sheet
•Statement of Cash Flows
•Retained Earnings Statement
•Footnote Information
Purpose of the Balance Sheet
• To present a picture of the
organization’s resources and of who
has a claim upon those resources.
• The Balance Sheet provides a
measure of value and a rough idea
of how that value was created.
3 Major Categories of Accounts are Found on the Balance Sheet
•ASSETS “What we have”
•LIABILITIES “What we owe”
•EQUITY “The residual value”
3 Major Categories of Accounts are Found on the Balance Sheet-
ASSETS
•ASSETS are “What we have”.
Assets represent the resources available to the organization that someone (management) will decide how to use.
Accountability begins with knowing the resources.
3 Major Categories of Accounts are Found on the Balance Sheet-
LIABILITIES
• LIABILITIES are “What we owe”.
Liabilities represent the “claim” on organizational resources from lenders (investors) apart from the organization.
3 Major Categories of Accounts are Found on the Balance Sheet-
EQUITY
•Equity measures the “value”.
Equity represents accounting’s measure of the organization’s value by taking the assets minus the liabilities (adjusted for any value created this period)
3 Major Categories of Accounts are Found on the Balance Sheet-
EQUITY
•Equity measures the “value”.
Equity represent the “claim” on organizational resources from owners (investors).
Balance Sheet Accounts are ongoing balances
• Such accounts are not “zeroed out”
(referred to as “permanent” accounts)
ASSETS - Balance Sheet – “Permanent”
LIABILITIES- Balance Sheet – “Permanent”
EQUITY - Balance Sheet – “Permanent”
Assets
CASH – currency; set (defined) amount immediately available to be spent.
CASH EQUIVALENTS – anything that can be converted into cash with near certainty within 90 days.
Assets
MARKETABLE SECURITIES (SHORT-TERM INVESTMENTS) –• Investments made by the
organization in stocks of other companies, loans to other companies or to governments.
Assets
ACCOUNTS RECEIVABLE – money owed to the company by customers (because they have not yet paid us for the sale or for the work that we did).
ALLOWANCE FOR DOUTFUL ACCOUNTS – An amount set aside to represent Accounts Receivables that will not be collected. Subtracted from the Asset total.
Assets
INVENTORY – items for sale.
SUPPLIES – (not inventory) miscellaneous items not for sale. These items are kept because they are used in the company’s work. THESE ITEMS ARE USED UP!
PARTS INVENTORY– (not inventory) replacement parts kept on hand for equipment and vehicle repair.
Assets
PREPAID RENT – Rent paid in advance
PREPAID INSURANCE – Insurance paid in advance.
PREPAID ________ – ________ paid in advance.
AssetsPROPERTY – LandBuildingsWarehouseManufacturing Plant
BUILDING IMPROVEMENTS (To Rented Buildings)–
Displays, Counters & ShelvingFixtures & FurnishingsCubicles
Assets
EQUIPMENT – miscellaneous items used in the company’s work. THESE ITEMS ARE NOT USED UP WITHIN 1 YEAR!
Vehicles & Heavy EquipmentMachinesComputers, Projectors, Sound SystemsFurniture and Office Furnishings
Assets
ACCUMULATED DEPRECIATION – The TOTAL amount of Depreciation taken on
Buildings, Building Improvements, Equipment (NOT LAND).
Subtracted from the Asset Total.
Assets
INTANGIBLE ASSETS – the cost of legal agreements.
COPYRIGHTSPATENTSTRADEMARKSCOMPANY NAMEACCESS RIGHTS
Assets
GOODWILL – the amount that one company overpaid to purchase another company.
Assets
ACCUMULATED AMORTIZATION – The TOTAL amount of Depreciation taken on INTANGIBLE ASSETS.
Subtracted from the Asset Total.
LIABILITIES (We Owe)
ACCOUNTS PAYABLE –• The amount(s) owed to people who
we do business with.
LIABILITIES (We Owe)
NOTE PAYABLE –• The amount(s) owed to a bank, a
person or a business that loaned us money for less than one year.
LIABILITIES (We Owe)
CURRENT MATURITIES OF LONG-TERM DEBT–
• The amount(s) owed THIS YEAR to a bank, a person or a business that loaned us money for more than one year.
LIABILITIES (We Owe)
ACCRUED LIABILITIES –WAGES PAYABLE- amounts owed
employeesUTILITIES PAYABLE – amounts owed
for utilities RENT PAYABLE – amount owed for
rent
LIABILITIES (We Owe)
UNEARNED REVENUE – money collected for work that has not been performed or completed.
We owe the work- not the $$.
DEFERRED REVENUE is another name for UNEARNED REVENUE.
LIABILITIES (We Owe)
INTEREST PAYABLE – money owed for the interest on a loan.
LIABILITIES (We Owe)
LONG-TERM DEBT – The amount owed on amounts borrowed for more than one year.
BONDS PAYABLE – (usually large) amounts owed to a group of many investors.
MORTGAGE PAYABLE – amounts owed for real estate.
EQUITY(HOW THE VALUE WAS CREATED)
COMMON STOCK AND ADDITIONAL PAID IN VALUE – Together, these two accounts represent the amount received from selling stock in the company. This is the amount of value that was created from selling company stock.
EQUITY(HOW THE VALUE WAS CREATED)
RETAINED EARNINGS – represents the total amount of earnings from every past year. This is the total amount of value that was created from the company’s performance over the entire life of the company.
EQUITY(HOW THE VALUE WAS CREATED)
TREASURY STOCK – the amount paid to buy back our own stock. This is the total amount of value lost from “unselling” the company’s stock.
According to Accounting, the company can not invest in its own stock!
EQUITY(HOW THE VALUE WAS CREATED)
TREASURY STOCK – the amount paid to buy back our own stock. This is the total amount of value lost from “unselling” the company’s stock.
According to Accounting, the company can not invest in its own stock!
EQUITY(HOW THE VALUE WAS CREATED)
COMPREHENSIVE INCOME – controversial items that are not included in earnings.
Increases or decreases in investments;Increases or decreases in foreign
currency;Increases or decreases in the estimates
of the pension liability;