Introduction to Financial Accounting Business 1A

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall.Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall.

Introduction to Financial Accounting Business 1A

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“Those who recognize the value of accounting information and learn how to use it to make better decisions have a competitive advantage over those who don’t.”

–Steve Albrecht


Today's ObjectivesDefine purpose of financial accountingTopic organizationMajor student deliverables & expectationsStudent resources Learning the basics of the most popular business performance report in existence.

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Define accounting purpose

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Accounting is “the language of business.”Financial Accounting is designed to provide

information to people who make decisions:Measures business activity in monetary termsProcesses the data into reportsCommunicates the results to decision makersDecisions are made, and the process repeats

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Business Activity Measures

& processes Financial

Reports Decision Making


Who are the Decision Makers, and how do they use financial information?

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Internal UsersTheir uses?

External UsersTheir uses?

Kenneth I. Chenault

http://www.americanexpress.com/



http://finance.yahoo.com/q?s=BRK-A


We focus on Financial Accounting

Financial AccountingProvides information for external decision makers

Past performance Financial standingReporting the past

Managerial AccountingFocuses on information for internal decision makers

Performance planningResource allocationCreating the future

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Business 1B focuses on Managerial Accounting


Can financial information explain why Sonic’s value is down while McDonalds’ is up?

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http://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1314043200000&chddm=494224&chls=IntervalBasedLine&cmpto=NYSE:MCD;INDEXNASDAQ:.IXIC&cmptdms=0;0&q=NASDAQ:SONC&ntsp=0&fct=big


Earning your competitive advantage

To really know how to read accounting information, we need to know how it is prepared.

It takes practice to learn the mechanical processes of accounting.

It takes even more work to understand it, communicate it, and use it in making decisions.

The payoff is your competitive advantage which you will hold for the rest of your life


Topic Organization

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Topic Organization

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The fundamentalsThe accounting cycle

1/3 of the class.Reporting core business activities – sales, etcReporting & safeguarding business possessionsReporting amounts that the business owesReporting owners’ equity & related transactionsReporting cash flowsReading the story You as the analyst


Major Student Deliverables & Expectations

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Major Student Deliverables

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Homework – due on timeRead chapter & homework before lectureHomework is submitted onlinePractice Set links chapters 1 through 4QuizzesIn-class early in semester, must be here for the pointsMid terms and final exam1st the accounting cycle2nd covers the following 1/3 of the classFinal, covers last section of class and is comprehensiveAnalysis casesAnalysis of financial statements and decision makingTied to the topics of study at handIn class workOpportunities will arise for work time in class leading to direct points and/or participation points. Attendance is required to earn these points.


Student Expectations

Study progress, and topic progressionClass preparation & participationTimeliness ResponsibilityPlagiarism, cheating, ethicsEtiquette

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Student Resources

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Student Resources

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http://www.mpc.edu/GotSuccess/Pages/default.aspx


Student Resources

Your instructorOffice hours M-Th @ 9:00am, Friday @ 10:00amEmail works great too! [email protected] 831-646-4072

Your peersGet the “how to”, not just the “what is”Find people who match your style & schedule

The internetClass website, YouTube, Accounting sites galore

Your book & 16

mailto:[email protected]


Student Resources

Using your bookUse it, a lotRead it before classLearning objectives, review before readingSummary problems, pause for reviewDemo Doc, detailed demonstrationsVocabulary, know all of itHomework: Short, Exercises, Problems, More

‘Homework, practice, feedback, help, more

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http://www.myaccountinglab.com/


Accounting progress: Integrity makes a comeback

“New from accounting, sir. Two and two is four again.”


www.vault.com

What does the business world really need from you?

• Analytical skills -- To prepare and analyze financial data, identify and explain discrepancies and variations.

• Teamwork -- To work effectively with team members and clients to complete

projects and build relationships. • Communication -- To interact with clients to discuss issues and obtain and

share information in a professional manner.

• Organization/time management -- To prioritize and juggle various tasks, and to identify and manage time constraints.

• Flexibility -- To adapt to changing clients, schedules and working hours.

http://www.vault.com/nr/newsmain.jsp?nr_page=3&ch_id=253&article_id=15038781


The most popular business performance report in existence.

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Net Income: Wealth created by the business

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Businesses create wealth by selling goods & services to customers for more than the cost to provide those goods & services.

Buy ice cream sandwiches for 50¢, sell for $1.00 Hire a mechanic for $30/hour, bill at $90/hourHire programmers for $50/hour, and rake in $1.2Billion to advertise on your site.

Net Loss: Wealth lost by the business


Revenues: Goods & Services Provided

Amounts earned by delivering goods or services to customers

Sales revenueService revenueRevenueSalesOr any similar terms used to convey the concept of supplying goods or servicesAka “The Top Line”

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Expenses: Resources ConsumedDecrease in equity that occurs from using assets or increasing liabilities in the course of delivering goods or services to customers

The cost of the merchandise that was soldStore or rent expenseSalary expenseAdvertising expenseUtilities expenseInterest expenseProperty tax expense

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Income Statement

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Income Statement Evaluation

www.yahoo.com/financeShout out a company about which you careHelp read and analyze their income statementJudge a few companies based solely on their I.S.

Who is doing well? Fair? Poorly?

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http://www.yahoo.com/finance


Let’s make some of this stick!Mastering the basics of the income statement

Pair upBlind drill to masterSwitchRepeat

Content:HeaderThree body items:

Category labelsDefinitionsMathematical relationship

Company Name HereIncome Statement

Period of time goes here

Revenue

Expenses

Net income

Date formatting?

Label?

Label?

Label?

Math relationship?


Next Time!

Read all of chapter 1 before class. You review key terms. You familiarize yourself with the assignmentsLecture covers chapter 1 contentWe Review the income statement We hammer on the balance sheetWe work with profitability and financial standingAnother quiz likely


Income Statement Quiz!

Write out an income statement template as follows:

Main title, including proper time frame characteristicsList the three main categories on an income statement.

Describe each in terms that have meaning to you.Show their mathematical relationship.

Introduction to Financial Accounting Business 1A

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