Accounting I

ACC 100 Accounting in action

Topics
What is accounting? The building blocks of accounting The basic accounting equation Using the basic accounting equation Financial statements

What is Accounting?

Measures business activity

Processes the data

Communicates the results

What is Accounting? cont.

Exchanges of value between two entities Exchanges within an entity that affect the accounting equation

Transactions

Events

Happenings that can be reliably measured Business events and natural events

What is Accounting? cont.

Information needed to process the transaction

What value How the When the to place on transaction transaction the should be occurred transaction categorized

What is Accounting? cont.

Identify stakeholders Access stakeholders informational needs

Prepare reports for stakeholders

Record economic data about business activities and events Design the accounting information system to meet stakeholders needs

The Building Blocks of Accounting

Ethics in Financial Reporting

Generally Accepted Accounting Principles

Assumptions

Ethics in Financial Reporting

Recognize an ethical situation and issues involved

Identify and analyze principal elements of situation

Identify alternatives and weigh impact

Generally Accepted Accounting Principles

Guidelines that govern how accountants present financial information.

Measure Process Communicate

Assumptions

Monetary unit assumption

Economic Entity Assumption

Accounting records include only data that can be expressed in monetary terms Activities of the entity be kept separate from activities of owners or other entities

The Basic Accounting Equation

Assets

Liabilities

Owners Equity

The Basic Accounting Equation cont

Assets $3,000 = Liabilities = $2,000 + Owners Equity + $1,000

Liabilities (claims)

Assets (Economic Resources)

Owners Equity (claims)

The rights of the creditors are the liabilities. The rights of the owners encompass equity.

Resources owned by a business

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Using the Basic Accounting Equation

Assets Liabilities Owners Equity

$30,000

$0

$30,000

Cash $30,000 Owners Equity, Capital $30,000

Using the Basic Accounting Equation cont

Assets Liabilities Owners Equity

$9,000 ($9,000)

$0

$0

Land $9,000 Cash $9,000

Using the Basic Accounting Equation cont

Assets Liabilities Owners Equity

$2,500

$2,500

$0

Supplies $2,500 Accounts Payable $2,500

Financial Statements

Balance Sheet
Statement of Owners Equity

Income Statement
Cash Flow Statement

The Balance Sheet

Keep in Touch Massage Balance Sheet December 31, 2011
Assets Cash Supplies Land Total Assets $12,000 1,000 9,000 $27,000 Liabilities Accounts Payable $12,000 Owners Equity Pam Moss, capital $15.000 Total Liabilities & OE $27,000

The Income Statement

Keep in Touch Massage Income Statement For the Period Ended December 31, 2011
Revenues earned Expenses: Wages expense Rent expense Supplies expense Utilities expense Miscellaneous expense Total Expense Net Income $120,000 33,000 21,000 3,000 7,000 2,000 66,000 $ 54,000 Net income is carried to the statement of owners equity

The Statement of Owners Equity

Keep in Touch Massage Statement of Owners Equity For the Period Ended December 31, 2011
Pam Moss, capital December 31, 2010 Net Income, December 31, 2011 Less: withdrawals Increase in equity Pam Moss, capital December 31, 2011 $ 54,000 44,000 $ 10,000 $ 15,000 $ 5,000

The Statement of Cash Flows

Keep in Touch Massage Statement of Cash Flows For the Period Ended December 31, 2011 Cash flows from operating activities: Receipts collections from customers Payments to suppliers and employees Net cash provided by operating activities Cash flows from financing activities: Owners withdrawals Net increase in cash Cash January 1, 2011 Cash December 31, 2011

$120,000 (66,000) $ 54,000

$ (44,000) $ 10,000 2,000 $ 12,000

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Summary
What is accounting? The building blocks of accounting The basic accounting equation Using the basic accounting equation Financial statements