Quản trị Kinh doanh - Chapter 1: Accounting in business

Accounting in BusinessChapter 1PowerPoint Editor: Beth Kane, MBA, CPACopyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 01-C1: Importance of Accounting 2Importance of AccountingC1For example, the sale by Apple of an iPhone.Keep a chronological log of transactions.Prepare reports such as financial statements.3 01-C2: Users of Accounting Information 4Users of Financial InformationC2Accounting is called the language of business because all organizations set up an accounting information system to communicate data to help people make better decisions. Accounting serves many users who can be divided into two groups: external users and internal users.5Opportunities in AccountingAccounting information is in all aspects of our lives. When we earn money, pay taxes, invest savings, budget earnings, and plan for the future, we use accounting.6C2NEED-TO-KNOWIdentify the following users of accounting information as either an (a) external or (b) internal user.RegulatorCEOShareholderControllerExecutive EmployeeExternal AuditorProduction ManagerNonexecutive Employeea) External userb) Internal usera) External userb) Internal userb) Internal usera) External userb) Internal usera) External userExternal users of accounting information are NOT directly involved in running the organization.Internal users of accounting information ARE directly involved in managing and operating an organization.7 01-C3: Ethics 8Ethics – A Key ConceptC3The goal of accounting is to provide useful information for decisions. For information to be useful, it must be trusted. This demands ethics in accounting. Ethics are beliefs that distinguish right from wrong. They are accepted standards of good and bad behavior.9Fraud TriangleC3Three factors must exist for a person to commit fraud: opportunity, pressure, and rationalization.Envision a way to commit fraud with a low perceived risk of getting caughtFails to see the criminal nature of the fraud or justifies the actionMust have some pressure to commit fraud, like unpaid bills10 01-C4: Generally Accepted Accounting Principles 11Generally Accepted Accounting Principles (GAAP)C4Financial accounting is governed by concepts and rules known as generally accepted accounting principles (GAAP). GAAP aims to make information relevant, reliable, and comparable. Relevant information affects decisionsof users. Reliable information is trusted by users. Comparable information is helpful in contrasting organizations.12International StandardsC4In today’s global economy, there is increased demand by external users for comparability in accounting reports. This demand often arises when companies wish to raise money from lenders and investors in different countries. Differences between U.S. GAAP and IFRS are decreasing as theFASB and IASB pursue a convergence process aimed to achieve a single set of accounting standards for global use.International Accounting Standards Board (IASB) An independent group (consisting of individuals from many countries), issues International Financial Reporting Standards (IFRS)International Financial Reporting Standards (IFRS) Identify preferred accounting practices 13Conceptual Framework and ConvergenceC414Principles and Assumptions of AccountingC4General principles are the basic assumptions, concepts, and guidelines for preparing financial statements. General principles stem from long-used accounting practices. Specific principles are detailed rules used in reporting business transactions and events. Specific principles arise more often from the rulings of authoritative groups.15Accounting PrinciplesC4Measurement Principle (or Cost Principle)Accounting information is based on actual cost. Actual cost is considered objective.Expense Recognition Principle (or Matching Principle)A company must record its expenses incurred to generate the revenue reported.Full Disclosure PrincipleA company is required to report the details behind financial statements that would impact users’ decisions.Revenue Recognition PrincipleRecognize revenue when it is earned.Proceeds need not be in cash.Measure revenue by cash received plus cash value of items received. 16Accounting AssumptionsMonetary Unit AssumptionExpress transactions and events in monetary, or money, units.Business Entity AssumptionA business is accounted for separately from other business entities, including its owner.Time Period AssumptionPresumes that the life of a company can be divided into time periods, such as months and years.Going-Concern AssumptionReflects assumption that the business will continue operating instead of being closed or sold.C417Proprietorship, Partnership, and CorporationHere are some of the major attributes of proprietorships, partnerships, and corporations:C418Sarbanes–Oxley (SOX)Congress passed the Sarbanes–Oxley Act to help curb financial abuses atcompanies that issue their stock to the public. SOX requires that these public companies apply both accounting oversight and stringent internal controls. The desired results include more transparency, accountability, and truthfulness in reporting transactions.C419Dodd-Frank Wall Street Reform and Consumer Protection ActThis act was designed to:promote accountability and transparency in the financial system, put an end to the notion of “too big to fail,” protect the taxpayer by ending bailouts, and protect consumers from abusive financial services.20C4NEED-TO-KNOWIdentify the following terms/phrases as either an accounting (a) principle, (b) assumption, or (c) constraint.Time periodFull disclosureRevenue recognitionMaterialityMeasurementBusiness entityGoing concernExpense recognition21C3/C4NEED-TO-KNOWthat would impact users' decisions.Full disclosure principleA company must report the details behind financial statements Disclosures are often in the footnotes to the financial statements.Expense recognition principleAlso called the matching principleGoverns the timing of expenses reported on the income statement.Expenses are recognized in the same time period as the revenues they help generate.Principles: Govern the amount and/or timing of information to be reported in financial statements.Measurement principleAlso called the cost principleCost is measured on a cash or equal-to-cash basis.Governs valuation of assets and liabilities on the balance sheet.Revenue recognition principleGoverns the timing of revenues recognized on the income statement.Revenue is recognized when earned.22C3/C4NEED-TO-KNOWAssumptions: Generally related to the financial statement headings.Going concern assumptionMonetary unit assumptionTime period assumptionBusiness entity assumptionPresumption that the business will continue operating instead of being closed or sold.We can express transactions and events in monetary units. (i.e., Dollars, Pesos, Euros)Presumes that the life of a company can be divided into time periods, and that useful reports can be prepared for those periods.A business is accounted for separately from other business entities, including its owner(s).Accounting constraints: Reasonableness of information to be reported.MaterialityBenefits exceed costOnly information that would influence the decisions of a reasonable person needs to be disclosed.Materiality is a function of the nature of the item and/or dollar amount.The benefits of the information disclosed must be greater than the costs of providing the information.23C3/C4NEED-TO-KNOWIdentify the following terms/phrases as either an accounting (a) principle, (b) assumption, or (c) constraint.Time PeriodFull DisclosureRevenue Recognitiona) Principlec) Constrainta) Principleb) Assumptionb) Assumptiona) Principleb) Assumptiona) PrincipleMaterialityMeasurementBusiness EntityGoing ConcernExpense RecognitionAccounting TodayAccounting Today36,000$ 7,800$ 6,500 800 2,200 17,300 18,700$ 26,000$ 10,000$ 21,000 10,400 49,000 10,000 106,400 116,400$ 116,400$ Total assetsTotal liabilities & equityLandOwner's EquityOffice equipmentOwner, CapitalCashAccounts payableAccounts receivableOffice suppliesBalance SheetDecember 31, 2014AssetsLiabilitiesTotal expensesNet income (loss)Miscellaneous expenseIncome StatementFor Month Ended December 31, 2014Revenues:Consulting fees earnedExpenses:Rent expenseSalaries expenseTelephone expenseFootnotes to financial statements24C3/C4 01-A1: The Accounting Equation 25Transaction Analysis and the Accounting Equation The Accounting EquationExpanded Accounting Equation:A1Net Income26LiabilitiesEquityAssets=+NEED-TO-KNOWUse the accounting equation to compute the missing financial statement amounts.AssetsLiabilitiesEquityBose$150$30$120Vogue$400$100$300= += += +Use the expanded accounting equation to compute the missing financial statement amounts.AssetsLiabilitiesEquityOwner, CapitalOwner, WithdrawalsRevenuesExpensesNikon$200$80$120$100$0$60($40)YouTube$400$160$240$220($10)$120($90)= ++ - + -27NEED-TO-KNOWJan. 1Jamsetji invested $4,000 cash in the Tata company.Jan. 5The company purchased $2,000 of equipment on credit.Jan. 14The company provided $540 of services for a client on credit.Jan. 21The company paid $250 cash for an employee’s salaryAssume Tata began operations on January 1 and completed the following transactions during its first month of operations. Arrange the following asset, liability, and equity titles in a table: Cash; Accounts Receivable; Equipment; Accounts Payable; J. Tata, Capital; J. Tata, Withdrawals; Revenues; and Expenses.LiabilitiesCashAccounts ReceivableEquipmentAccounts Payable+ J. Tata, Capital- J. Tata, Withdrawals+ Revenues- ExpensesJan. 1$4,000$4,000Jan. 5$2,000$2,000Jan. 14$540$540Jan. 21($250)($250)$3,750$540$2,000$2,000$4,000$0$540($250)+ EquityAssets = Total Assets$6,290Total Liabilities2,000Total Equity$4,29028 01-P2: Financial Statements 29Financial StatementsThe four financial statements and their purposes are: Income statement — describes a company’s revenues and expenses along with the resulting net income or loss over a period of time due to earnings activities. Statement of owner’s equity— explains changes in equity from net income (or loss) and from any owner investments and withdrawals over a period of time. Balance sheet — describes a company’s financial position (types and amounts of assets, liabilities, and equity) at a point in time. Statement of cash flows — identifies cash inflows (receipts) and cash outflows (payments) over a period of time.P230NEED-TO-KNOWIncome StatementStatement of Owner’s EquityBalance SheetAssetsDetail of AssetsLiabilitiesDetail of LiabilitiesEquity:+ Owner investmentsBeginning Capital- Owner withdrawals- Owner withdrawalsEnding Owner, Capital+ RevenuesDetail of Revenues± Net income (loss)- ExpensesDetail of ExpensesEnding CapitalNet income (loss)+ Owner investmentsAccounts payable$22,367Investments and other assets$163,042Other liabilities61,084Land and equipment16,597Cost of sales (expense)119,724Selling and other expense14,149Cash14,259Accounts receivable13,102Owner, Capital, September 29, 20X1118,210Net income37,037Withdrawals in fiscal year 20X231,698Owner, Capital, September 28, 20X2123,549Revenues170,910Prepare the (a) income statement, (b) statement of owner's equity, and (c) balance sheet, for Apple using the following condensed data from its fiscal year ended September 28, 20X2.31NEED-TO-KNOWAccounts payable$22,367Investments and other assets$163,042Other liabilities61,084Land and equipment16,597Cost of sales (expense)119,724Selling and other expense14,149Cash14,259Accounts receivable13,102Owner, Capital, September 29, 20X1118,210Net income37,037Withdrawals in fiscal year 20X231,698Owner, Capital, September 28, 20X2123,549Revenues170,910Owner, Capital, September 28, 20X2$123,549Total liabilities83,451Owner, Capital, September 28, 20X2123,549Total assets$207,000Total liabilities and equity$207,000APPLEIncome StatementFor Fiscal Year Ended September 28, 20X2APPLEStatement of Owner's EquityFor Fiscal Year Ended September 28, 20X2EquityAPPLEBalance SheetSeptember 28, 20X2$22,367Revenues$170,910Owner, Capital, September 29, 20X1$118,210Less: Withdrawals by owner(31,698)AssetsExpensesCost of sales (expense)$119,724Cash$14,259Accounts payableOther liabilities61,084LiabilitiesPlus: Net income37,037Total expenses133,873Selling and other expense14,149Net income$37,037Accounts receivable13,102Land and equipment16,597Investments and other assets163,04232Global ViewBasic Principles of U.S. GAAP and IFRSBoth include broad and similar guidance for accounting. Neither specifies particular account names nor the detail required. IFRS does require reporting of certain minimum line and other minimum disclosures that U.S. GAAP does not. GAAP requires disclosures for the current and prior two years for the income statement, statement of cash flows, and statement of retained earnings (equity)IFRS requires disclosures for the current and prior year. 33Global ViewTransaction Analysis of U.S. GAAP and IFRSBoth apply transaction analysis identically (as shown in this chapter). Although some variations exist in revenue and expense recognition and other principles, all of the transactions in this chapter are accounted for identically under these two systems. U.S. GAAP is sometimes considered more “rules-based” whereas IFRS is more principles-based, particularly in deciding how to account for certain transactions.U.S. GAAP—more focused on strictly following the accounting rules.IFRS—more focused on a review of the situation and how accounting can best reflect it.34Global ViewFinancial StatementsBoth U.S. GAAP and IFRS prepare the same four basic financial statements. To illustrate, a condensed version of Samsung’s income statement follows (numbers are in thousands of U.S. dollars).35Global ViewStatus of IFRS Adoption36 01-A2: Return on Assets 37Return on AssetsA2Return on assets (ROA) is stated in ratio form as net income divided by the average total assets invested.Net incomeAverage total assetsReturn on assets =38 01-A3: Return and Risk Analysis 39Appendix 1A Return and Risk AnalysisA3Many different returns may be reported.ROAInterest return on savings accounts.Interest return on corporate bonds.Risk is the uncertainty about the return we will earn.The lower the risk, the lower our expected return.40 01-C5: Business Activities and the Accounting Equation 41Appendix 1B Business Activities and the Accounting EquationC5Three major types of business activities:Financing activities provide the means organizations use to pay for resources such as land, buildings, and equipment to carry out plans.Owner financing—resources contributed by the owner along with any income the owner leaves in the organization.Nonowner financing—resources contributed by creditors (lenders). Financial management —the task of planning how to obtain these resources and to set the right mix between owner and creditor financing.42Appendix 1B Business Activities and the Accounting EquationC5Three major types of business activities:Investing activities are the acquiring and disposing of resources (assets) that an organization uses to acquire and sell its products or services.Asset management—determining the amount and type of assets for operations.Assets—invested amounts.Liabilities—creditors’ claims.Equity—owner’s claim.43Appendix 1B Business Activities and the Accounting EquationC5Three major types of business activities:Operating activities involve using resources to research, develop, purchase, produce, distribute, and market products and services.Strategic management —the process of determining the right mix of operating activities for the type of organization, its plans, and its market.44Appendix 1B Business Activities and the Accounting EquationC545End of Chapter 146