Professional Documents
Culture Documents
John J. Wild
Sixth Edition
McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 01
Introducing Accounting in
Business
Conceptual Chapter Objectives
1-3
Analytical Chapter Objectives
1-4
Procedural Chapter Objectives
1-5
C1
Importance of Accounting
is a
Accounting Identifies
system that
Records
information
Relevant Communicates
that is
Reliable
about an
organizations
Comparable business activities.
1-6
C1
Accounting Activities
Identifying Recording
Business Business
Activities Activities
Communicating
Business
Activities
1-7
C2 Users of Accounting
Information
Internal Users
External Users
Private
Public accounting
accounting 60%
24%
Government,
not-for-profit,
& education
16%
1-11
C3
Ethics
Beliefs that
Accepted
distinguish
standards of
right from
good and bad
wrong
behavior
1-12
C3
1-13
C4
Generally Accepted Accounting
Principles
Financial accounting practice is governed by
concepts and rules known as generally accepted
accounting principles (GAAP).
1-14
C4
Setting Accounting Principles
1-17
C4
Sarbanes-Oxley Act
1-18
A1
Accounting Equation
Liabilities
Assets + Equity
1-19
A1
Assets
Cash
Accounts Notes
Receivable Receivable
Resources
owned or
Vehicles controlled
by a Land
company
Store Buildings
Supplies
Equipment
1-20
A1
Liabilities
Accounts Notes
Payable Payable
Creditors
claims on
assets
Taxes Wages
Payable Payable
1-21
A1
Equity
Contributed Retained
Capital Earnings
Owners
claim on
assets
Dividends
1-22
A1
Assets
Assets =
= Liabilities
Liabilities +
+ Equity
Equity
Contributed _ _ Expenses
Capital
Dividends
+ Revenues
Retained Earnings
1-23
P1
Transaction Analysis
$ 20,000 $ - $ - $ - $ - $ 20,000
$ 20,000 = $ 20,000
1-25
P1
Transaction Analysis
$ 20,000 = $ 20,000
1-26
P1
Transaction Analysis
$ 20,000 = $ 20,000
1-27
P1
Transaction Analysis
$ 21,200 = $ 21,200
1-28
P1
Transaction Analysis
$ 25,200 = $ 25,200
1-29
P1
Transaction Analysis
The balances so far appear below. Note that the
Balance Sheet Equation is still in balance.
Assets = Liabilities + Equity
$ 25,200 = $ 25,200
1-30
P1
Transaction Analysis
1-31
P1
Transaction Analysis
$ 28,200 = $ 28,200
1-32
P1
Transaction Analysis
$ 27,400 = $ 27,400
$ 26,900 = $ 26,900
Financial Statements
Lets prepare the Financial Statements
reflecting the transactions we have
recorded.
1. Income Statement
2. Statement of Retained Earnings
3. Balance Sheet
4. Statement of Cash Flows
1-35
P2
Income Statement
SCOTT COMPANY
Income Statement Net income is the
For Month Ended December 31, 2011
difference
Revenues: between
Consulting revenue $ 3,000 Revenues and
Expenses:
Salaries expense 800 Expenses.
Net income $ 2,200
Assets Liabilities
Cash $ 9,700 Accounts payable $ 1,200
Supplies 1,200 Notes payable 4,000
Equipment 16,000 Total liabilities 5,200
Equity
Common stock 20,000
Retained earnings 1,700
Total assets $ 26,900 Total liabilities and equity $ 26,900
1-38
P2
Statement of Cash Flows
SCOTT COMPANY
Statement of Cash Flows
For Month Ended December 31, 2011
ROA is a profitability
measure.
1-40
End of Chapter 01
1-41