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ACCOUNTING IN BUSINESS
Chapter 1
© 2009 The McGraw-Hill Companies, Inc.,All Rights Reserved
CHAPTER OBJECTIVES
• Recognize that accounting is an important information system
• General characteristics of accounting information
• Understand the assumptions and principles in accounting
• Understand accounting equation
• Be able to analyze transactions and events
• Identify components of the Financial Statements
• Nắm được định nghĩa và tầm quan trọng của môn kế toán
• Nắm được các yêu cầu cơ bản đối với thông tin kế toán
• Hiểu rõ các giả thiết và nguyên tắc thực hành kế toán
• Nắm chắc phương trình cân bằng kế toán
• Có thể phân tích các nghiệp vụ và sự kiện
• Nhận dạng các báo cáo tài chính
DEFINITION OF ACCOUNTING
Accounting
Identifying Phân loại
Select transactions and events
Recording Ghi chép
Input, measure and classify
Communicating Truyền đạt
Prepare, analyze and interpret
McGraw Hill/Irwin‐ Slide 2
USERS OF ACCOUNTINGINFORMATION
External Users
•Lenders • Consumer Groups•Shareholders • External Auditors
•Governments • Customers
Internal Users
•Managers • Sales Staff•Officers/Directors • Budget Officers
•Internal Auditors • Controllers
McGraw Hill/Irwin‐ Slide 3
USERS OF ACCOUNTINGINFORMATION
External Users
Financial accounting (Kế toán tài chính) provides external users with financial statements.
Internal Users
Managerial accounting (kế toán quản trị) provides information needs for internal decision makers.
McGraw Hill/Irwin‐ Slide 4
ETHICS - A KEY CONCEPTĐạo đức
Beliefs that Accepted standardsdistinguish right from wrong of good and bad
from wrong behaviour
McGraw Hill/Irwin‐ Slide 7
SETTING ACCOUNTING PRINCIPLES
IASC
• IASs 1973 - 2001
IASB
• IFRS FROM 2001
VIỆT NAM
Bộ tài
chính
•Luật kế toán•VAS – Chuẩn mực kế toán Việt Nam
Các văn bản hướng dẫn thi hành luật và VAS
INTERNATIONAL ACCOUNTING
Qualitative Characteristics of Financial Statements
YÊU CẦU ĐỐI VỚI THÔNG TIN KẾ TOÁN
•Affects the decision of its users
•Nature & Materiality
RELEVANCEThích hợp, phù hợp
•Is trusted by users
•Faithful presentation; substance over form; Neutrality, Prudence, Completeness
RELIABILITYĐáng tin cậy
•Is helpful in contrasting information of organizations
COMPARABILITYCó thể so sánh
PRINCIPLES AND ASSUMPTIONSOF ACCOUNTING
Revenue Recognition Principle Nguyên tắc ghi nhận doanh thu1. Recognize revenue when it is earned.
2. Proceeds need not be in cash.3. Measure revenue by cash received
plus cash value of items received.
Matching Principle Nguyên tắc phù hợp
A company must record its expensesincurred to generate the revenuereported.
Cost Principle – Historical cost Giá vốn lịch sử
Accounting information is based onactual cost. Actual cost is
considered objective.
Full Disclosure PrincipleNguyên tắc công khai
A company is required to report thedetails behind financial statementsthat would impact users’ decisions.
McGraw Hill/Irwin‐ Slide 11
PRINCIPLES AND ASSUMPTIONSOF ACCOUNTING
Now FutureMonetary Unit Assumption
Thước đo tiền tệGoing-Concern Assumption
Hoạt động liên tục
Reflects assumption that the businesswill continue operating instead of
being closed or sold.
Business Entity Assumption Nguyên tắc thực thể kinh doanh
A business is accounted forseparately from other business
entities, including its owner.
Express transactions and events inmonetary, or money, units.
Time Period Assumption Nguyên tắc kỳ kế toán
Presumes that the life of a company canbe divided into time periods, such asmonths and years.
McGraw Hill/Irwin‐ Slide 12
ACCRUAL BASIS VS.CASH BASIS
Accrual BasisCơ sở dồn tích
Revenues arerecognized whenearned and expensesare recognized whenincurred.
Accounting
Cash BasisCơ sở tiền mặt
Revenues arerecognized whencash is received andexpenses recordedwhen cash is paid.
Not GAAP
McGraw Hill/Irwin‐ Slide 3
THE ACCOUNTING EQUATIONPhương trình cân bằng kế toán
Accounting Equation
Assets Tài sản
= Liabilities Vốn nợ
+ Equity Vốn chủ sử hữu
McGraw Hill/Irwin‐ Slide 17
ASSETSResources owned or
controlled by the entity
NON-CURRENT ASSETS
Long-term prepaid expenses
Tangible fixed assetsVehicles, equipments,
buildings
CURRENT ASSETS
Cash, inventories, accounts receivable
Long term investments: Investment in stock and bonds
Intangible fixed assets: copyrights, patents
Cash 8,200$ Accounts receivable 11,200 Merchandise inventory 21,000 Office supplies 550 Store supplies 250 Prepaid insurance 300 Total current assets 41,500$
Assets
Z-MARTPartial Balance Sheet
December 31, 2009
Classified Balance Sheet
HighlyLiquid
LessLiquid
Snowboarding ComponentsBalance Sheet (Partial)
January 31, 2009
Current assetsASSETS
Cash $ 6,500Short-term investments 2,100Accounts receivable 4,400Merchandise inventory 27,500Prepaid expenses 2,400
Total current assets $ 42,900
Current assets are expected to be sold,collected, or used within one year or the
company’s operating cycle.Equipment $ 33,200Buildings 170,000 203,200Less accumulated depreciation 53,000 150,200Land 73,200
Intangible assets 10,000Total assets $ 343,800
McGraw Hill/Irwin‐ Slide 31
Snowboarding ComponentsBalance Sheet (Partial)
January 31, 2009
Current assetsASSETS
Cash $ 6,500Short-term investments 2,100Accounts receivable 4,400Merchandise inventory 27,500Prepaid expenses 2,400
Total current assets $ 42,900Long-term investmentsNotes receivable 1,500Investments in stocks and bonds 18,000Land held for future expansion 48,000Total investments 67,500
Long-term investments are expected to be heldfor more than one year or the operating cycle.
Land 73,200Intangible assets 10,000Total assets $ 343,800
McGraw Hill/Irwin‐ Slide 32
Snowboarding ComponentsBalance Sheet (Partial)
January 31, 2009
Current assetsASSETS
Cash $ 6,500Short-term investments 2,100Accounts receivable 4,400Merchandise inventory 27,500Prepaid expenses 2,400
Total current assets $ 42,900Long-term investments
Tangible fixed assets are assets usedto produce or sell products and services.
Plant assetsEquipment $ 33,200Buildings 170,000 203,200Less accumulated depreciation 53,000 150,200Land 73,200
Intangible assets 10,000Total assets $ 343,800
McGraw Hill/Irwin‐ Slide 33
Snowboarding ComponentsBalance Sheet (Partial)
January 31, 2009
Current assetsASSETS
Cash $ 6,500Short-term investments 2,100Accounts receivable 4,400Merchandise inventory 27,500Prepaid expenses 2,400
Total current assets $ 42,900Long-term investmentsNotes receivable 1,500Investments in stocks and bonds 18,000Land held for future expansion 48,000Total investments 67,500
Intangible fixed assets are long-term resourcesused to produce or sell products and services
and that lack physical form.Intangible assets 10,000Total assets $ 343,800
McGraw Hill/Irwin‐ Slide 34
Current Liabilities
Accounts payable
Wages payable
Non-current liabilities
Loans
Leases
LiabilitiesCreditors’ claims on assets
Snowboarding Components
Current liabilitiesAccounts payableWages payableNotes payable
Balance Sheet (Partial)January 31, 2009
LIABILITIES
$ 15,3003,2003,000
Current portion of long-term liabilities 7,500Total current liabilities $ 29,000
Current liabilities are obligations due within thelonger of one year or the company’s operating
cycle.Total liabilities and equity $ 343,800
McGraw Hill/Irwin‐ Slide 35
Snowboarding Components
Current liabilitiesAccounts payableWages payableNotes payable
Balance Sheet (Partial)January 31, 2009
LIABILITIES
$ 15,3003,2003,000
Current portion of long-term liabilities 7,500Total current liabilities $ 29,000
Long-term liabilities:Notes payable (net of current portion) 150,000
Long-term liabilities are obligations not duewithin the longer of one year or the company’s
operating cycle.
McGraw Hill/Irwin‐ Slide 36
EQUITY (Vốn chủ sở hữu)
Owner’sClaims onAssets
McGraw Hill/Irwin‐ Slide 20
Equity = owner capital – owner withdrawal
Owner capital = contributed capital + retained earnings
Snowboarding Components
Current liabilitiesAccounts payableWages payableNotes payable
Balance Sheet (Partial)January 31, 2009
LIABILITIES
$ 15,3003,2003,000
Current portion of long-term liabilities 7,500Total current liabilities $ 29,000
Long-term liabilities:Notes payable (net of current portion) 150,000
Total liabilities $ 179,000EQUITY
T. Hawk, Capital 164,800Total liabilities and equity $ 343,800
Equity is the owner’s claim on the assets.
McGraw Hill/Irwin‐ Slide 37
Distribution of profitsPhân phối lợi nhuận
• Profit = revenue - expense• Dividends – cổ tức• Reserve (các quĩ): quỹ phúc lợi xã
hội, quỹ khen thưởng • Reinvestment: tái đầu tư• Retained earnings: lợi nhuận chưa
phân phối, để tăng vốn• Giả sử div, reserve, reinvestment = 0
thì profit sẽ chỉ làm tăng equity
TRANSACTION ANALYSISEQUATION
Phương trình cân bằng kế toán
The accounting equation MUST remain inbalance after each transaction.
Assets = Liabilities + Equity
McGraw Hill/Irwin‐ Slide 22
TRANSACTION ANALYSIS
A company invests $30,000 cash tostart a consulting business .
The accounts involved are:(1) Cash (asset)
(2) Owner Capital (equity)
McGraw Hill/Irwin‐ Slide 23
TRANSACTION ANALYSIS
Purchased supplies paying $2,500 cash.
The accounts involved are:(1) Cash (asset)
(2) Supplies (asset)
McGraw Hill/Irwin‐ Slide 25
TRANSACTION ANALYSIS
Purchased supplies paying $2,500 cash.
Assets = Liabilities + Equity
Accounts Notes C. TaylorCash Supplies Equipment Payable Payable Capital
(1) $ 30,000 $ 30,000
(2) (2,500)$ 2,500
$ 27,500$ 2,500 $ - $ - $ - $ 30,000
$ 30,000 = $ 30,000
McGraw Hill/Irwin‐ Slide 26
TRANSACTION ANALYSIS
Purchased equipment for $26,000 cash.
The accounts involved are:(1) Cash (asset)
(2) Equipment (asset)
McGraw Hill/Irwin‐ Slide 27
TRANSACTION ANALYSIS
Purchased equipment for $26,000 cash.Assets = Liabilities + Equity
Accounts Notes C. TaylorCash Supplies Equipment Payable Payable Capital
(1) $ 30,000 $ 30,000
(2) (2,500)$ 2,500(3) (26,000) $ 26,000
$ 1,500$ 2,500 $ 26,000 $ - $ - $ 30,000
$30,000 = $30,000
McGraw Hill/Irwin‐ Slide 28
TRANSACTION ANALYSIS
Purchased Supplies of $7,100 and on account.
The accounts involved are:(1) Supplies (asset)
(2) Accounts Payable (liability)
McGraw Hill/Irwin‐ Slide 29
TRANSACTION ANALYSIS
Purchased Supplies of $7,100 and on account.
Assets = Liabilities + Equity
Accounts C. TaylorCash Supplies Equipment Payable Notes Payable Capital
(1) $ 30,000 $ 30,000
(2) (2,500) $ 2,500
(3) (26,000) $ 26,000
(4) 7,100 $ 7,100
$ 1,500 $ 9,600 $ 26,000 $ 7,100 $ - $ 30,000
$ 37,100 = $ 37,100
McGraw Hill/Irwin‐ Slide 30
TRANSACTION ANALYSIS
Provided consulting services receiving $4,200cash.
The accounts involved are:(1) Cash (asset)
(2) Revenues (equity)
McGraw Hill/Irwin‐ Slide 31
TRANSACTION ANALYSIS
Provided consulting services receiving $4,200cash.
Assets = Liabilities + Equity
Equipmen Accounts Notes C. TaylorCash Supplies t Payable Payable Capital Revenue
(1) $ 30,000 $ 30,000
(2) (2,500)$ 2,500
(3) (26,000) $ 26,000
(4) 7,100 $ 7,100
(5) 4,200 $ 4,200
$ 5,700$ 9,600$ 26,000 $ 7,100$ - $ 30,000 $ 4,200
$ 41,300 = $ 41,300
McGraw Hill/Irwin‐ Slide 32
FINANCIAL STATEMENTS (Báo cáo tài chính)
Let’s prepare the Financial Statements reflectingthe transactions we have recorded.
1.Income Statement2.Notes for financial statements
3.Balance Sheet4.Statement of Cash Flows
McGraw Hill/Irwin‐ Slide 33
INCOME STATEMENT (Báo cáo kết quả hoạt động kinh doanh)
FastForwardIncome Statement
For Month Ended December 31, 2009
Revenues:Consulting revenueRental revenue
Total revenuesExpenses:Rent expense
Salaries expenseTotal expenses
Net income
$ 5,800300$ 6,100
1,000700
1,700$ 4,400
Net income is thedifference between
Revenues andExpenses.
The income statement describes a company’s revenuesand expenses along with the resulting net income orloss over a period of time due to earnings activities.
McGraw Hill/Irwin‐ Slide 34
STATEMENT OF OWNER’S EQUITY (Báo cáo thay đổi trong vốn chủ sở hữu)
FastForwardIncome Statement
For Month Ended December 31, 2009
Revenues:
The net income of $4,400increases Owner's Equity
Consulting revenueRental revenue
Total revenuesExpenses:Rent expense
Salaries expenseTotal expenses
Net income
$ 5,800
300$ 6,100
1,000700
1,700$ 4,400
by $4,400.
FastForwardStatement of Owner's Equity
For Month Ended December 31, 2009C, Taylor, Capital December 1, 2009Plus: Investment by ower
Net income
Less: Withdrawals by ownerC. Taylor, Capital, December 31, 2009
$ -$ 30,000
4,40034,400
200$ 34,200
McGraw Hill/Irwin‐ Slide 35
BALANCE SHEET (Bảng cân đối kế toán)
The Balance Sheet describes a company’s financialposition at a point in time.
FastForwardBalance Sheet
December 31, 2009
Assets Liabilities & EquityCash $ 4,800 Accounts payable $ 6,200Supplies 9,600 Total liabilities 6,200Equipment 26,000 Equity
C. Taylor, Capital 34,200
Total assets $ 40,400 Total liabilities and equity $ 40,400
McGraw Hill/Irwin‐ Slide 36
1B - BUSINESS ACTIVITIES ANDTHE ACCOUNTING EQUATION
There are three major types of activities in any organization:1.Financing Activities - Provide the means organizationsuse to pay for resources such as land, buildings, andequipment to carry out plans.
2.Investing Activities - Are the acquiring and disposing ofresources (assets) that an organization uses to acquire andsell its products or services.3.Operating Activities - Involve using resources to research,develop, and purchase, produce, distribute, and marketproducts and services.
McGraw Hill/Irwin‐ Slide 39
STATEMENT OF CASH FLOWS(Báo cáo lưu chuyển tiền tệ)
FastForwardStatement of Cash Flows
For Month Ended December 31, 2009
Cash flows from operating activities:Cash received from clientsCash paid for supplies
Cash paid for rentCash paid to employees
Net cash provided by operating activitiesCash flows from investing activities:Purchase of equipment
Net cash used in investing activitiesCash flows from financing activities:Investment by owner
Withdrawal by ownerNet cash provided by financing
activitiesNet increase in cashCash balance, December 1, 2009
Cash balance, December 31, 2009
$ 6,100(3,400)(1,000)
(700)$ 1,000
(26,000)(26,000)
30,000(200)
29,800$ 4,800
-$ 4,800
McGraw Hill/Irwin‐ Slide 37
END OF CHAPTER 1
McGraw Hill/‐ Slide 40
Thank you for today!
See you next time!
Exercises1. At the beginning of the year, a company had $120,000 worth of liabilities.
During the year, assets increased by $160,000 and at year-end they equaled $360,000. Liabilities decreased $20,000 during the year. Calculate the beginning and ending values of equity.
2. The accounts of Garfield Company with the increases or decreases that occurred during the past year are as follows:
Except for net income, an investment of $3,000 by the owner, and a withdrawal of $11,000 by the owner, no other items affected the owner's capital account. Using the balance sheet equation, compute net income for the past year.
3. Analyzing following transactions a) On May 1, Mr. A formed a shoe consulting business, X company. In order to start
the business he invested $750,000 in cash.b) Company X spent $52,000 in cash for this period's advertising activities.c) Company X acquired $ 5000 tables and chairs on credit.
Account Increase Decrease
Cash 2500
Accounts receivable (5000)Accounts payable (11000)Note payables 16000
4. Provide descriptions for each transaction
Transactions Cash + Accounts receivable
+Supplies +Equipment = Accounts payable
+ B. Blue Capital
1) + 20000 +20000
2) -5000 + 5000
3) + 1500 +1500