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1、Chapter 1Introduction to Accounting and BusinessAccounting, 21st EditionWarren Reeve FessPowerPoint Presentation by Douglas CloudProfessor Emeritus of AccountingPepperdine University Copyright 2004 South-Western, a division of Thomson Learning. All rights reserved. Task Force Image Gallery clip art

2、included in this electronic presentation is used with the permission of NVTech Inc.Like right now.Some of the action has been automated, so click the mouse when you see this lighting bolt in the lower right-hand corner of the screen. You can point and click anywhere on the screen.1.Describe the natu

3、re of a business.2.Describe the role of accounting in business.3.Describe the importance of business ethics and the basic principles of proper ethical conduct.4.Describe the profession of accounting.5.Summarize the development of accounting principles and relate them to practice.6.State the accounti

4、ng equation and define each element of the equation.ObjectivesAfter studying this chapter, you should be able to:7.Explain how business transactions can be stated in terms of the resulting change in the basic elements of the accounting equation.Objectives8.Describe the financial statements of a prop

5、rietorship and explain how they interrelate.9.Use the ratio of liabilities to owners equity to analyze the ability of a business to withstand poor business conditions.Manufacturing Business ProductGeneral MotorsCars, trucks, vansIntelComputer chipsBoeingJet aircraftNikeAthletic shoes and apparelCoca

6、-ColaBeveragesSonyStereos and televisionTypes of BusinessesMerchandising Business ProductWal-MartGeneral merchandiseToys “R” UsToysCircuit CityConsumer electronicsLands EndApparelAInternet books, music, video retailerTypes of BusinessesService Business ProductDisneyEntertainmentDelta Air LinesTransp

7、ortationMarriott HotelsHospitality and lodgingMerrill LynchFinancial adviceSprintTelecommunicationTypes of BusinessesThere are three types of business organizationsProprietorshipPartnershipCorporationA proprietorship is owned by one individual. AdvantagesEase in organizingLow cost of organizingDisad

8、vantageLimited source of financial resourcesUnlimited liabilityJoes A partnership is owned by two or more individuals. AdvantagesMore financial resources than a proprietorship.Additional management skills.DisadvantageUnlimited liability.Joe and Martys A corporation is organized under state or federa

9、l statutes as a separate legal entity.AdvantageThe ability to obtain large amounts of resources by issuing stocks.DisadvantageDouble taxation.J & M, Inc. Business StrategiesA business strategy is an integrated set of plans and actions designed to enable the business to gain an advantage over its com

10、petitors, and in doing so, to maximize its profits.Business StrategiesUnder a low-cost strategy, a business designs and produces products or services of acceptable quality at a cost lower than that of its competitors.Wal-MartSouthwest AirlinesBusiness StrategiesUnder a differential strategy, a busin

11、ess designs and produces products or services that possess unique attributes or characteristics which customers are willing to pay a premium price.MaytagTommy HilfigerValue Chain of a BusinessA value chain is the way a business adds value for its customers by processing inputs into product or servic

12、e.InputsBusiness ProcessesProducts or ServicesCustomer ValueA business stakeholder is a person or entity having an interest in the economic performance of the business.Business Stakeholders2Assess stakeholders informational needs.The Process of Providing InformationSTAKEHOLDERSInternal: Owners, mana

13、gers, employees External: Customers, creditors, government 1Identify stake-holders.Accounting Information SystemDesign the accounting information system to meet stakeholders needs.34Record economic data about business activities and events.The Process of Providing Information5Prepare accounting repo

14、rts for stakeholders.STAKEHOLDERSInternal: Owners, managers, employees External: Customers, creditors, government Accounting Information SystemThe Process of Providing InformationBusiness Ethics1.Avoid small ethical lapses.2.Focus on your long-term reputation.3.You may expect to suffer adverse perso

15、nal consequences for holding to an ethical position.Sound Principles that form the foundation for ethical behaviorProfession of AccountingAccountants employed by a business firm or a not-for-profit organization are said to be engaged in private accounting.Accountants and their staff who provide serv

16、ices on a fee basis are said to be employed in public accounting.Generally Accepted Accounting Principles (GAAP)The business entity concept limits the economic data in the accounting system to data related directly to the activities of the business.The cost concept is the basis for entering the exch

17、ange price, or cost of an acquisition in the accounting records.The objectivity concept requires that the accounting records and reports be based upon objective evidence.The unit-of-measure concept requires that economic data be recorded in dollars.The Accounting EquationAssets = Liabilities + Owner

18、s EquityThe resources owned by a businessThe Accounting EquationAssets = Liabilities + Owners EquityThe rights of the creditors, which represent debts of the businessThe Accounting EquationAssets = Liabilities + Owners EquityThe rights of the ownersWhat is a business transaction?A business transacti

19、on is an economic event or condition that directly changes an entitys financial condition or directly affects its results of operations.On November 1, 2005, Chris Clark begins a business that will be known as NetSolutions.a. Chris Clark deposits $25,000 in a bank account in the name of NetSolutions.

20、Chris Clark, Capital25,000Investment by Chris ClarkCash25,000 a.AssetsOwners Equity=b. NetSolutions exchanged $20,000 for land.Chris Clark, Capital25,000 Cash + Land 25,000 Bal.AssetsOwners Equity= =b. 20,000+20,000Bal. 5,00020,00025,000 Accounts Chris Clark,Cash + Supplies + Land Payable CapitalAss

21、etsc. During the month, NetSolutions purchased supplies for $1,350 and agreed to pay the supplier in the near future (on account). Owners Liabilities + Equity= Bal.5,00020,00025,000c. + 1,350+ 1,350Bal.5,0001,35020,0001,35025,000= d. NetSolutions provided services to customers, earning fees of $7,50

22、0 and received the amount in cash.Bal.12,5001,35020,0001,35032,500d. + 7,500+ 7,500 Accounts Chris Clark,Cash + Supplies + Land Payable CapitalAssets Owners Liabilities + EquityBal.5,0001,35020,0001,35025,000Fees earned= = e. 3,6502,125 800 450 275WagesRentUtil.Misc. Accounts Chris Clark,Cash + Supp

23、lies + Land Payable CapitalAssetse. NetSolutions paid the following expenses: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275. Owners Liabilities + Equity= Bal.12,5001,35020,0001,35032,500= Bal.8,8501,35020,0001,35028,850 Accounts Chris Clark,Cash + Supplies + Land Payable Capita

24、lAssetsf. NetSolutions paid $950 to creditors during the month. Owners Liabilities + Equity= Bal.8,8501,35020,0001,35028,850f. 950 950= Bal.7,9001,35020,00040028,850 Accounts Chris Clark,Cash + Supplies + Land Payable CapitalAssetsg. At the end of the month, the cost of supplies on hand is $550, so

25、$800 of supplies were used. Owners Liabilities + Equity= Bal.7,9001,35020,00040028,850g. 800 800= Bal.7,90055020,00040028,050Supplies expense Accounts Chris Clark,Cash + Supplies + Land Payable CapitalAssetsh. At the end of the month, Chris withdrew $2,000 in cash from the business for personal use.

26、 Owners Liabilities + EquityBal.7,90055020,00040028,050h. 2,0002,000Bal.5,90055020,00040026,050With-drawal= = Owners withdrawalsExpensesDecreased byOwners EquityEffects of Transactions on Owners EquityIncreased byOwners investmentsRevenuesNet incomeAccounting reports, called financial statements, pr

27、ovide summarized information to the owner.Financial StatementsIncome statementA summary of the revenue and expenses for a specific period of time.Statement of owners equityA summary of the changes in the owners equity that have occurred during a specific period of time.Balance sheetA list of the ass

28、ets, liabilities, and owners equity as of a specific date.Statement of cash flowsA summary of the cash receipts and disbursements for a specific period of time.Fees earned$7 500 00Operating expenses:Rent expense $2 125 00Wages expense800 00Supplies expense 450 00Utilities expense 275 00Miscellaneous

29、 expenseTotal operating expenses 1 135 00 NetSolutionsIncome StatementFor the Month Ended November 30, 2005800 00Net income$3 050 00To the statement of owners equity Chris Clark, capital, November 1, 2005$ 0NetSolutionsStatement of Owners EquityFor the Month Ended November 30, 2005Investment on Nove

30、mber 1$25 000 00Net income for November3 050 00$28 050 00Less withdrawals 2 000 00Increase in owners equity26 050 00Chris Clark, capital, November 30, 2005$26 050 00From the income statementTo the balance sheet Assets LiabilitiesNetSolutionsBalance SheetNovember 30, 2005Cash$ 5 900 00Accounts Payabl

31、e$ 400 00Supplies550 00 Owners EquityLand20 000 00Chris Clark, cap.26 050 00Total liabilities andTotal assets$26 450 00 owners equity$26 450 00From the statement of owners equityThis balance sheet presented using the account form When the balance sheet displays the liabilities and owners equity belo

32、w the assets, the report form is being used.Cash flows from operating activities:Cash received from customers$ 7 500 00Deduct cash payments for expenses and payments to creditors4 600 00Net cash flow from operating activities2 900 00Cash flows from investing activities:Cash payment for acquisition o

33、f land(20 000 00Cash flows from financing activities:Cash received as owners investment$25 000 00Deduct cash withdrawal by owner2 000 00Net cash flow from financing activities23 000 00 Net cash flow and Nov. 30, 2005 cash bal.$ 5 900 00 NetSolutionsStatement of Cash FlowsFor the Month Ended November

34、 30, 2005Should match Cash on the balance sheet)Statement of Cash FlowsCash Flows from Operating ActivitiesThis section reports a summary of cash receipts and cash payments from operations.Cash Flows from Investing ActivitiesThis section reports the cash transactions for the acquisition and sale of

35、relatively permanent assets.Cash Flows from Financing ActivitiesThis section reports the cash transactions related to cash investments by the owner, borrowings, and cash withdrawals by the owner.Ratio of liabilities to owners equity=Total Liabilities Total owners equity (or total stockholders equity

36、)The ratio of liabilities to owners equity allows owners like Chris Clark to analyze the firms ability to withstand poor business conditions.Tools for Financial Analysis and InterpretationRatio of liabilities to owners equity= $400 $26,050Tools for Financial Analysis and Interpretation= 0.015Ratio o

37、f liabilities to owners equityThe EndChapter 1Chapter 2Analyzing TransactionsAccounting, 21st EditionWarren Reeve FessPowerPoint Presentation by Douglas CloudProfessor Emeritus of AccountingPepperdine University Copyright 2004 South-Western, a division of Thomson Learning. All rights reserved. Task

38、Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc.Some of the action has been automated, so click the mouse when you see this lightning bolt in the lower right-hand corner of the screen. You can point and click anywhere on the screen.1.Ex

39、plain why accounts are used to record and summarize the effects of transactions on financial statements.2.Describe the characteristics of an account.3.List the rules of debit and credit and the normal balances of accounts.4.Analyze and summarize the financial statement effects of transactions.Object

40、ivesAfter studying this chapter, you should be able to:5.Prepare a trial balance and explain how it can be used to discover errors.6.Discover errors in recording transactions and correct them. 7.Use horizontal analysis to compare financial statements from different periods.ObjectivesEach financial s

41、tatement item, called an account, is included in the ledger. A group of accounts for a business entity is called a ledger.A list of the accounts in a ledger is called a chart of accounts.Major Account ClassificationsAssets are resources owned by the business.Liabilities are debts owed to outsiders (

42、creditors).CashSuppliesBuildingAccounts receivableAccounts payableNotes payableWages payableMajor Account ClassificationsLiabilities are debts owed to outsiders (creditors).CashSuppliesBuildingAccounts receivableAccounts payableNotes payableWages payableAssets are resources owned by the business.Lia

43、bilities are often identified on the balance sheet by titles that include payable.Owners equity is the owners right to the assets of the business.Revenues are increases in owners equity as a result of selling services or products.Chris Clark, CapitalChris Clark, DrawingFees EarnedFares EarnedCommiss

44、ion RevenueExpenses are the using up of assets or consuming of services to generate revenue.Rent ExpenseSalary ExpenseUtilities ExpenseMajor Account ClassificationsTo assist you in learning, an account can be drawn to resemble the letter T.The T-AccountThe T-account has a title.CashThe T-AccountThe

45、left side of the account is the debit side.CashLeft side debitThe T-AccountThe right side of the account is the credit side.CashLeft side debitRight side creditThe T-AccountCash3,7504,3002,9008501,4007002,900Typical entriesBalancing a T-AccountCash3,7504,3002,9008501,4007002,90010,950First, foot the

46、 debit side.8501,4007002,900Cash3,7504,3002,90010,9505,850Next, foot thecredit side.8501,4007002,900Cash3,7504,3002,90010,9505,850Subtract total credits from total debits to obtain the account balance.5,100Transactions and Balance Sheet AccountsPost. Ref.JOURNALDateDescriptionDebitCreditPage 11 2 3

47、4Nov.12005Cash25 000 00Chris Clark, Capital25 000 00Invested cash in NetSolutions.(A)On November 1, Chris Clark deposits $25,000 in a bank account in the name of NetSolutions.(A)On November 1, Chris Clark deposits $25,000 in a bank account in the name of NetSolutions.Effects of this entry in the Led

48、gerCashNov. 125,000Nov. 125,000Chris Clark, Capital4 5 6 789105Land20 000 00Cash20 000 00Purchased land for buildingsite.(B)On November 5, NetSolutions bought land for $20,000, paying cash.Effects of this entry in the LedgerCashNov. 125,000Nov. 520,000LandNov. 520,000(B)On November 5, NetSolutions b

49、ought land for $20,000, paying cash.10 11 121314151610Supplies1 350 00Accounts Payable1 350 00Purchased supplies on account.(C)On November 10, NetSolutions purchased supplies on account for $1,350.(C)On November 10, NetSolutions purchased supplies on account for $1,350.Effects of this entry in the L

50、edgerSuppliesNov. 101,350Accounts PayableNov. 101,35030Accounts Payable950 00Cash950 00Paid creditors on account.30 313233343536(F)On November 30, NetSolutions paid creditors on account, $950.CashNov. 125,000Nov. 525,000187,500303,650Effects of this entry in the LedgerAccounts PayableNov. 101,350Nov

51、. 3095030950(F)On November 30, NetSolutions paid creditors on account, $950. DebitsCreditsAsset accounts.Increase (+)Decrease (-)Liability accountsDecrease (-)Increase (+)Owners equity (capital) accounts.Decrease (-)Increase (+)Rules of Debit / Credit Balance Sheet AccountsCredit for increases (+)Cr

52、edit for increases (+)Credit for decreases (-)Debit for increases (+)Debit for decreases (-)Debit for decreases (-)ASSETSAsset AccountsLIABILITIESLiability AccountsOwners Equity AccountsOWNERS EQUITYBalance Sheet Accounts(D)On November 18, NetSolutions received fees of $7,500 from customers for serv

53、ices provided .18Cash7 500 00Fees Earned7 500 00Received fees from customers.14 15 1617181920Effects of this entry in the LedgerCashNov. 125,000Nov. 525,000Fees EarnedNov. 187,500187,500(D)On November 18, NetSolutions received fees of $7,500 from customers for services provided .(E)Throughout the mo

54、nth, NetSolutions incurred the following expenses: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275 .30Wages Expense2 125 00Rent Expense800 00Utilities Expense450 00Miscellaneous Expense275 00Cash3 650 00Paid expenses.18 192021222324Effects of this entry in the LedgerCashNov. 125,

55、000Nov. 525,000Wages ExpenseNov. 302,125187,500Rent ExpenseNov. 30800Utilities ExpenseNov. 30450Miscellaneous ExpenseNov. 30275303,650(E)Throughout the month, NetSolutions incurred the following expenses: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275 .In every entry the sum of

56、the debits always equal the sum of the credits.(G)On November 30, a count revealed that $800 of the supplies inventory had been used.30Supplies Expense800 00Supplies800 00Supplies used during November.25 262728293031Effects of this entry in the LedgerSuppliesNov. 101,350Supplies ExpenseNov. 30 800No

57、v. 30800(G)On November 30, a count revealed that $800 of the supplies inventory had been used.Double-Entry Accounting“ Double-entry accounting is based on a simple concept: each party in a business transaction will receive something and give something in return. In bookkeeping terms, what is receive

58、d is a debit and what is given is a credit. The T account is a representation of a scale or balance.” Luca PacioliDeveloper ofDouble-EntryAccountingScale or BalanceReceiveDEBITGiveCREDITT accountLeft SideReceiveDEBITRight SideGiveCREDITCredit for increases (+)Credit for decreases (-)Debit for increa

59、ses (+)Debit for decreases (-)Expense AccountsRevenue AccountsRules of Debit / Credit Income Statement Accounts DebitsCreditsRevenue accountsDecrease (-)Increase (+)Expense accountsIncrease (+)Decrease (-)Income Statement AccountsWithdrawals by the OwnerPost. Ref.JOURNALDateDescriptionDebitCreditPag

60、e 21 2 3 4Nov.302005Chris Clark, Drawing2 000 00Cash2 000 00Chris Clark withdrew cash forpersonal use.(H)On November 30, Chris Clark withdrew $2,000 in cash from NetSolutions for personal use.30950302,000CashNov. 125,000Nov. 525,000187,500303,650Effects of this entry in the LedgerChris Clark, Drawin