NGUYEN THI KIMNGUYEN THI KIMDate: Saturday, 15 September Date: Saturday, 15 September

FINANCIAL ACCOUNTINGFINANCIAL ACCOUNTING

Chapter 1 Chapter 1

INTRODUCTION TO ACCOUNTING INTRODUCTION TO ACCOUNTING AND BUSINESSAND BUSINESS

CONTENT CONTENT

1.1. Business & Accounting Business & Accounting

2.2. Accounting equation, elements of Accounting equation, elements of the equationthe equation

3.3. Business transactions change basic Business transactions change basic elements of accounting equationelements of accounting equation

4.4. Financial statements of a Financial statements of a proprietorship and the interrelateproprietorship and the interrelate

Nature of a businessNature of a business

Definition Definition detaildetail

Types of businessTypes of business detaildetail

Types of business organizations Types of business organizations detaildetail

Business strategiesBusiness strategies detaildetail

BUSINESS BUSINESS STAKEHOLDERSSTAKEHOLDERS

• A Business stakeholderA Business stakeholder

– person or entity person or entity having interest having interest in in the economic performance of the the economic performance of the business. business.

• Accounting, an information Accounting, an information system system

– provides provides reportsreports to stakeholders to stakeholders

– about about economic activities economic activities and and conditioncondition of a business of a business

Business ethicsBusiness ethics

• Moral principles Moral principles

– guide the conduct of individuals guide the conduct of individuals →ethics. →ethics.

• Proper ethical conduct Proper ethical conduct

– not only consider not only consider your best your best interest interest

– but also but also best interest of othersbest interest of others

Profession of accountingProfession of accounting

• Accountant →business firm, not-Accountant →business firm, not-for-profit organization for-profit organization

– private accountingprivate accounting

• Accountant provide services on Accountant provide services on a fee basis a fee basis

– public accountingpublic accounting

Profession of accounting Profession of accounting (Cont.)(Cont.)Private Private accountingaccounting

•Management accountant,Management accountant,•Industrial/cost accountant,Industrial/cost accountant,•Chief/controller, Chief/controller, •Certified management Certified management accountant (CMA)accountant (CMA)

Public Public accountingaccounting

Certified Public Certified Public Accountant (CPAs)Accountant (CPAs)

Specialized accounting Specialized accounting fieldsfields

• Financial accounting: Financial accounting:

– Recording, ReportingRecording, Reporting

economic data and activities for a business.economic data and activities for a business.

• Managerial/management accounting:Managerial/management accounting:

– Uses financial accounting, estimated data Uses financial accounting, estimated data

– Management day-to-day operations Management day-to-day operations

– Planning future operations.Planning future operations.

Generally accepted accounting Generally accepted accounting principlesprinciples

• GAAP GAAP

– followed by financial accountants followed by financial accountants

– reports able to compare between reports able to compare between companiescompanies

• Financial Accounting Standards Financial Accounting Standards Boards (FASB) Boards (FASB)

– authoritative body authoritative body

primary responsibility for primary responsibility for developing accounting principles. developing accounting principles.

Business entity Business entity conceptconcept

• Business activities are recorded separately Business activities are recorded separately

from the activities of the stakeholdersfrom the activities of the stakeholders

• Cost concept Cost concept

– basis for entering the exchange pricebasis for entering the exchange price

• Objectivity concept Objectivity concept

– accounting records and reports based on accounting records and reports based on objective evidenceobjective evidence..

• Unit of measure concept Unit of measure concept

– economic data recorded in economic data recorded in dollarsdollars. .

– MoneyMoney is common unit measurement is common unit measurement

Business transactions and Business transactions and the accounting equationthe accounting equation

• Business transaction: Business transaction: – economic event/condition economic event/condition – changes entity’s financial changes entity’s financial

condition condition – directly affects its results of directly affects its results of

operationsoperations

• exampleexample

Financial statementsFinancial statements• Income statement: Income statement:

– a summary of revenue and expenses a summary of revenue and expenses

– for a specific period of timefor a specific period of time

• Statement of owner’s equity: Statement of owner’s equity: – A summary of the changes in the owner’s equity A summary of the changes in the owner’s equity – occurred during a specific period of timeoccurred during a specific period of time

• Balance sheet: Balance sheet: – a list of the assets, liabilities, and owner’s equity a list of the assets, liabilities, and owner’s equity – as of a specific date, as of a specific date,

• Statement of cash flows:Statement of cash flows: – a summary of the cash receipts and cash payments a summary of the cash receipts and cash payments – for a specific period of time, such as a month or a yearfor a specific period of time, such as a month or a year

Fees earnedOperating expenses - - Total operating expensesNet income

Company NameIncome Statement

For the month/year ended ….

$1,000

Supplies $350

$900$100

Salary $550

Capital at (beginning period)Additional investment by ownerNet income for the period

Less withdrawalsIncrease in owner's equityCapital at (ending period)

Company NameStatement of Owner's EquityFor the month/year ended ….

$20,000$5,000

$100

$200

$4,900

$24,900

Asset LiabilitiesCash $ - $Accounts receivable $ Owner's equitySupplies $ Capital $Land $ total liability & Total assets $ Owner's equity $

Company NameBalance Sheet

At Month Day, Year