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description
Transcript of 1
Introduction to
Accounting and Business
Universidad
Cuauhtémoc Maestría en Administración de Hospitales
Educación a Distancia
Contabilidad Administrativa
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1. Describe the nature of a business, the role of accounting, and ethics in business
2. Summarize the development of accounting principles and relate them to practice
3. State the accounting equation and define each element of the equation
4. Describe and illustrate how business transactions can be recorded in terms of the resulting change in the elements of the accounting equation
5. Describe the financial statements of a corporation and explain how they interrelate
Index
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1
Describe the nature of a
business, the role of
accounting, and ethics in
business.
1-4
Types of Businesses
Delta Air Lines Transportation services
Service Business Service
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Merchandising Business Product
Wal-Mart General merchandise
Manufacturing Business Product
General Motors Corp. Cars, trucks, vans
1-5
The Role of Accounting in Business
Accounting can be defined as an
information system that provides
reports to users about the economic
activities and condition of a business.
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1-6
The area of accounting that provides
internal users with information is called
managerial accounting.
Managerial Accounting
The objective of managerial
accounting is to provide relevant and
timely information for managers’ and
employees’ decision-making needs.
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1-7
The area of accounting that provides
external users with information is
called financial accounting.
Financial Accounting
The objective of financial accounting
is to provide relevant and timely
information for the decision-making
needs of users outside of the
business.
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1-8
Ethics are moral principles
that guide the conduct of
individuals.
Role of Ethics in
Accounting and Business
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Summarize the
development of accounting
principles and relate them
to practice.
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1-10
Under the business entity
concept, the activities of a
business are recorded
separately from the activities
of its owners, creditors, or
other businesses.
Business Entity Concept
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• 70% of business entities in the United
States.
• Easy and cheap to organize.
• Resources are limited to those of the
owner.
• Used by small businesses.
A proprietorship is owned by one
individual.
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Business Entity Concept
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• Generates 90% of business revenues.
• 20% of the business organizations in the United
States.
• Ownership is divided into shares called stock.
• Can obtain large amounts of resources by issuing
stocks.
• Used by large businesses.
A corporation is organized under state or
federal statutes as a separate legal taxable
entity.
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Business Entity Concept
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Under the cost concept,
amounts are initially recorded
in the accounting records at
their cost or purchase price.
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Cost Concept
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The objectivity concept requires
that the amounts recorded in the
accounting records be based on
objective evidence.
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Objectivity Concept
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The unit of measure concept
requires that economic data
be recorded in currency.
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Unit of Measure Concept
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State the accounting
equation and define each
element of the equation.
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The resources
owned by a
business
Assets = Liabilities + Owner’s Equity
The Accounting Equation
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The rights of the
creditors are the
debts of the
business.
The rights of the
owners
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4
Describe and illustrate how
business transactions can be
recorded in terms of the resulting
change in the elements of the
accounting equation.
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A business transaction is an
economic event or condition that
directly changes an entity’s
financial condition or its results
of operations.
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Business Transaction
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On November 1, 2009, Chris Clark
deposits $25,000 in a bank account in
the name of NetSolutions in return for
shares of stock in the corporation.
Transaction A
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1-21
CAPITAL STOCK
25,000
CASH
25,000 a. =
Assets
Stockholders’
Equity =
Transaction A (continued)
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Transaction B
On November 5, 2009, NetSolutions
paid $20,000 for the purchase of land
as a future building site.
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CASH + LAND
25,000 Bal.
Assets =
=
Bal. 5,000 20,000 25,000
b. –20,000 +20,000
CAPITAL STOCK
25,000
Stockholders’
Equity
Transaction B (continued)
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On November 10, 2009,
NetSolutions purchased supplies
for $1,350 and agreed to pay the
supplier in the near future.
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Transaction C
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CASH + SUPPLIES + LAND
5,000 20,000 25,000 Bal.
Assets =
=
ACCOUNTS CAPITAL
PAYABLE + STOCK
Stockholders’
Liabilities + Equity
Transaction C (continued)
c. +1,350 +1,350
Bal. 5,000 1,350 20,000 1,350 25,000
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On November 18, 2009, NetSolutions
received cash of $7,500 for providing
services to customers. A business
earns money by selling goods or
services to its customers. This amount
is called Revenue.
Transaction D
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CASH + SUPPLIES + LAND
5,000 1,350 20,000 Bal.
Assets
Transaction D (continued)
d. +7,500
Bal. 12,500 1.350 20,000
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Transaction D (continued)
ACCOUNTS CAPITAL FEES
PAYABLE + STOCK + EARNED
1,350 25,000 Bal.
Liabilities + Stockholders’ Equity
d. +7,500
Bal. 1,350 25,000 7,500
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On November 30, 2009, NetSolutions
paid the following expenses during
the month: wages, $2,125; rent, $800;
utilities, $450; and miscellaneous,
$275.
Transaction E
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CASH + SUPPLIES + LAND
12,500 1,350 20,000 Bal.
Assets
Transaction E (continued)
e. –3,650
Bal. 8,850 1.350 20,000
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Transaction E (continued)
ACCOUNTS CAPITAL FEES WAGES RENT UTIL. MISC.
PAYABLE + STOCK + EARNED – EXP. – EXP. – EXP. – EXP.
1,350 25,000 7,500 Bal.
Liabilities + Stockholders’ Equity
e. –2,125 –800 –450 –275
Bal. 1,350 25,000 7,500 –2,125 –800 –450 –275
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On November 30, 2009,
NetSolutions paid creditors on
account, $950.
Transaction F
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CASH + SUPPLIES + LAND
8,850 1,350 20,000 Bal.
Assets
Transaction F (continued)
f. –950
Bal. 7,900 1.350 20,000
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Bal.
Liabilities + Stockholders’ Equity
f. –950
Bal. 400 25,000 7,500 –2,125 –800 –450 –275
Transaction F (continued)
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ACCOUNTS CAPITAL FEES WAGES RENT UTIL. MISC.
PAYABLE + STOCK + EARNED – EXP. – EXP. – EXP. – EXP.
1,350 25,000 7,500
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On November 30, 2009, Chris Clark
determined that the cost of supplies
on hand at the end of the period was
$550.
Transaction G
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CASH + SUPPLIES + LAND
7,900 1,350 20,000 Bal.
Assets
Transaction G (continued)
g. –800
Bal. 7,900 550 20,000
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ACCOUNTS CAPITAL FEES WAGES RENT SUP. UTIL. MISC.
PAYABLE + STOCK + EARNED – EXP. – EXP. – EXP. – EXP. – EXP.
400 25,000 7,500 –2,125 –800 –450 –275 Bal.
g. –800
Bal. 400 25,000 7,500 –2,125 –800 –800 –450 –275
Transaction G (continued)
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Liabilities + Stockholders’ Equity
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On November 30, 2009, NetSolutions
pays $2,000 to stockholders (Chris
Clark) as dividends.
Transaction H
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CASH + SUPPLIES + LAND
7,900 550 20,000 Bal.
Assets
Transaction H (continued)
h. –2,000
Bal. 5,900 550 20,000
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Transaction H (continued)
ACCTS. CAPITAL, DIVI- FEES WAGES RENT SUP. UTIL. MISC.
PAY. + STOCK – DENDS + EARNED – EXP. – EXP. – EXP. – EXP. – EXP.
400 25,000 7,500 –2,125 –800 –800 –450 –275 Bal.
Liabilities + Stockholders’ Equity
h. –2,000
Bal.400 25,000 –2,000 7,500 –2,125 –800 –800 –450 –275
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5
Describe the financial
statements of a
corporation and explain
how they interrelate.
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The income statement reports the revenues and expenses for a period of time, based on the matching concept.
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Income Statement
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The matching concept is applied by matching the expenses with the revenue generated during a period by those expenses.
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Matching Concept
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The excess of revenue over the expenses is called net income or net profit. If the expenses exceed the revenue, the excess is a net loss.
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Net income is carried
to the retained
earnings statement.
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Exhibit 6 Financial Statements for NetSolutions
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From the income statement
To the balance sheet
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Exhibit 6 Financial Statements for NetSolutions (continued)
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This amount is compared
to the net cash flow on the
statement of cash flows. From the retained
earnings statement
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Exhibit 6 Financial Statements for NetSolutions (continued)
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This amount should match
Cash on the balance sheet.
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Financial Statements for NetSolutions (continued) Exhibit 6
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The End
Universidad
Cuauhtémoc Maestría en Administración de Hospitales
Educación a Distancia
Contabilidad Administrativa