...Lesson 1 Chapter 1 LIFA 1.1 WHAT IS ACCOUNTING? · Accounting- an information system that identifies, measures, records and communicates understandable, relevant, reliable, and comparable information about an organization’s economic activities. · Recordkeeping, or bookkeeping, is the recording of financial transactions, either manually or electronically, for the purpose of creating a reliable bank of data · Primary objective of accounting- to provide useful info for decision-making · Accounting info results from the accounting activities of identifying, measuring, recording, reporting, and analyzing economic transactions. 1. What is the major objective of accounting? · Accounting is an information and measurement system that identifies, measures, records, and communicates understandable, relevant, reliable, and comparable information to people that helps them in making better decisions. It helps people in business to identify and react to investment opportunities, and better assess opportunities, products, investments, and social[->0] and community responsibilities. 2. Distinguish between accounting and recordkeeping. · Recordkeeping is the recording of financial transactions and events, either manually or electronically. While recordkeeping is essential to data reliability, accounting is this and much more. Accounting includes identifying, measuring, recording, reporting, and analyzing economic events and transactions. It involves interpreting information, and designing...
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... Chapter: Chapter 2: Financial Statements and Accounting Transactions True/False 1. A balance sheet covers a period of time such as a month or year. Ans: False Difficulty: Easy LO: 1 2. The legitimate claims of a business's creditors take precedence over the claims of the business owner or owners. Ans: True Difficulty: Easy LO: 1 3. The income statement is a financial statement that shows revenues earned and expenses incurred by a business over a specified period of time. Ans: True Difficulty: Easy LO: 1 4. Net income is the excess of expenses over revenues, whereas net loss is the excess of revenues over expenses. Ans: False Difficulty: Easy LO: 1 5. The natural business year for most businesses is always the same as the calendar year. Ans: False Difficulty: Moderate LO: 1 6. The balance sheet shows whether or not the firm achieved its primary objective of earning a profit. Ans: False Difficulty: Easy LO: 1 7. Expenses are costs incurred or the using up of assets from generating revenue. Ans: True Difficulty: Easy LO: 1 8. Liabilities are defined as "the residual interest in the assets of an entity that remains after deducting its equity." Ans: False Difficulty: Easy LO: 1 9. A characteristic of assets is their ability to provide current benefits to the business. Ans: False Difficulty: Hard LO: 1 ...
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...Accounting I 280 Solution to Quick Quiz State the four most common forms of business enterprises and briefly describe them. Answer: 1. Sole Proprietorship is an unincorporated business owned by one person. 2. Partnership is an unincorporated business owned by two or more persons. 3. Corporation is a type of business organization recognized under the law as an entity separate from its owners. It provides certain legal protection for the owners against lawsuits brought against the company. They are allowed to do many of the same things any person would be able to do: own land and other property; enter into contracts; sue and be sued in court; pay taxes; conduct business, and so forth. 4. Limited Liability Company (LLC) is a type of business organization recognized under the law as an entity separate from its owners. It has features of both a Corporation and Partnership. It provides certain legal protection for the owners against lawsuits brought against the company. LLCs provide certain tax benefits to the company and the owners. The Sole Proprietorship and Partnership forms are often considered "natural" business forms, because they can be created with only the actions of the owners. The mere conduct of business by an individual creates a Sole Proprietorship automatically. Two or more individuals conducing business together automatically creates a Partnership, although that may not have been the intention of the people originally. Corporations and LLCs are...
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...Fundamental Accounting Principles, Seventeenth Edition 1. Accounting in Business Text © The McGraw−Hill Companies, 2004 “I love chocolate, and so I’m having fun making money”—Elise Macmillan (Evan Macmillan on right) 1 Accounting in Business A Look at This Chapter Accounting plays a crucial role in the information age. In this chapter, we discuss the importance of accounting to different types of organizations and describe its many users and uses. We explain that ethics are crucial to accounting. We also describe business transactions and how they are reflected in financial statements. A Look Ahead Chapter 2 further describes and analyzes business transactions. We explain the analysis and recording of transactions, the ledger and trial balance, and the double-entry system. More generally, Chapters 2 through 4 focus on accounting and analysis, and they illustrate (via the accounting cycle) how financial statements reflect business activities. Larson−Wild−Chiappetta: Fundamental Accounting Principles, Seventeenth Edition 1. Accounting in Business Text © The McGraw−Hill Companies, 2004 Learning Objectives CAP Conceptual Analytical Learning Objectives are organized by conceptual, analytical, and procedural. Procedural prepare basic financial P1 Identify andand explain how they statements interrelate. (p. 17) C1 Explain the purpose and importance of accounting in the information age. (p. 4) A1 Define and interpret the accounting equation...
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...Analyzing Business Transactions LEARNING OBJECTIVES 1. 2. Record in equation form the financial effects of a business transaction. Define, identify, and understand the relationship between asset, liability, and owner’s equity accounts. Analyze the effects of business transactions on a firm’s assets, liabilities, and owner’s equity and record these effects in accounting equation form. Prepare an income statement. Prepare a statement of owner’s equity and a balance sheet. Define the accounting terms new to this chapter. LP2 Chapter NEW TERMS accounts payable accounts receivable assets balance sheet break even business transaction capital equity expense fair market value fundamental accounting equation income statement liabilities net income net loss on account owner’s equity revenue statement of owner’s equity withdrawals 3. 4. 5. 6. www.southwest.com Rollin King and Herb Kelleher had a simple notion when they got into the airline business: If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline. What began as a small Texas airline has grown to become one of the largest airlines in America. Today, Southwest Airlines flies almost 100 million passengers a year to 63 cities all across the country. In an economy where airlines struggle to stay out of bankruptcy, Southwest has flourished. Other airlines have tried to imitate...
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...The Accounting Cycle The Accounting cycle of a business require a set of steps to that keep a record of events and transactions that happens during an appointed time span. The time span typically last a month. The accounting clerk usually performs a multitude of task within an accounting cycle. Such as, general clerical duties, accounting and bookkeeping functions, and process account payables and receivables as needed. (Winthrop). The accounting departments create a chart with accounts and determine how to record the financial information. Businesses form a method to secure the certainty of recording financial information that generates a change in their financial standing. Every month, companies execute tasks to allow the recording of their financial events and also their transactions. These tasks incorporate procedures to arrange financial statements to contribute useful information for the private and foreign users. If for some reason an issue is not calculable then it is not reported. Tax experts and governing agencies provide codes and policies to assure the confidence of a full exposure and compatibility of all financial information. The FASB issued the following guideline for recognizing revenue: "Revenue is recognized when it is realized or realizable and it is earned" (Siegel, Levine, Qureshi, & Shim, 2001). Analysis and Journalizing Many businesses use a double-entry system that is a method that records every action with a debit and a credit. In...
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...form that is useful for a specific purpose. Now, we examine how financial data is transformed into financial information and reported on three very important financial statements—the balance sheet, income statement, and statement of cash flows. We begin by describing why the fundamental accounting equation is the basis for a firm’s balance sheet. the accounting equation The accounting equation is a simple statement that forms the basis for the accounting process. This equation shows the relationship between a firm’s assets, liabilities, and owners’ equity. ● ● ● ● ● ● Assets are the resources a business owns—cash, inventory, equipment, and real estate. Liabilities are the firm’s debts—borrowed money it owes to others that must be repaid. Owners’ equity is the difference between total assets and total liabilities—what would be left for the owners if the firm’s assets were sold and the money used to pay off its liabilities. The relationship between assets, liabilities, and owners’ equity is shown by the following accounting equation: Assets = Liabilities + Owners’ equity The dollar total of all of a firm’s assets cannot equal more than the total funds obtained by borrowing money (liabilities) and the investment of the owner(s). Whether a business is a small corner grocery store or a giant corporation such as General...
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...Answer the following questions based on the report of LTT Aquaculture SdnBhd.. 1. Describe the nature of the business of LTT Aquaculture SdnBhd.. Answer: The nature of business for LTT Aquaculture SdnBhd is rearing fresh water fish. 2. Identify 6 resources of the business considered as assets from an accounting point of view. Explain why these resources are considered as assets of the business. Answer: a) Empurau fish (1.5kg and above) - This is considered as current asset as they are selling this to generate profit b) Brood stock (8 kg) - This is considered as non-current asset as it helps to generate more resources c) Farm - This is considered as property, plant & equipment d) Special effect concrete pond system - This is considered as property, plant & equipment e) Ozone processor -This is considered as property, plant & equipment f) Cash in hand - The owner's investment in the business g) Knowledge in the field - This is considered as asset too as the knowledge in rearing empurau will bring in more profit 3. Every year The company intends to invest RM1 million per year for the next three years and plough back its profit to fund expansion of the farm’s infrastructure. Is profit cash? Explain. What accounting information would be useful to help LTT management make such a decision? Answer: Using accounting equation for LTT Aquaculture's 3 years plan, these are transactions that could took place A = L + OE Year 1 + Initial Investment (RM 1 mil) ...
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...Accounting Presentation Group members The Accounting Information of System The Personnel, procedures, devices, and records used by an organization to develop accounting information and communicate that information to decision makers The accounting process Economic activities Accounting “links” decision makers with economic activities and with the results of their decisions. Decision makers Accounting information Actions (decisions) Types of Accounting Information Financial Providing information about the financial resources, obligations, and activities of an economic entity that is intended for use primarily by external decision makers – investors and creditors. Managerial Providing information that is intended primarily for use by internal management in decision making required to run the business. return of investment The repayment to an investor of the amount originally invested in another enterprise. Basic Functions of an Accounting System Interpret and record business transactions. Classify similar transactions into useful reports. Summarize and communicate information to decision makers. Information System Cost & Revenue Determination Job costing Process costing ABC Sales Assets & Liabilities Plant and equipment Loans & equity Receivables, payables & cash Cash Flows From operations From financing From investing Information Users Investors Creditors Managers Owners Customers Employees...
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...ACCOUNT CLASSIFICATION AND PRESENTATION Account Title Accounts Payable Accounts Receivable Accumulated Depreciation—Buildings Accumulated Depreciation—Equipment Advertising Expense Allowance for Doubtful Accounts Amortization Expense Bad Debt Expense Bonds Payable Buildings Cash Common Stock Copyrights Cost of Goods Sold Debt Investments Depreciation Expense Discount on Bonds Payable Dividend Revenue Dividends Dividends Payable Equipment Freight-Out Gain on Disposal of Plant Assets Goodwill Income Summary Income Tax Expense Income Taxes Payable Insurance Expense Interest Expense Interest Payable Interest Receivable Interest Revenue Inventory Classification A Current Liability Current Asset Plant Asset—Contra Plant Asset—Contra Operating Expense Current Asset—Contra Operating Expense Financial Statement Balance Sheet Balance Sheet Balance Sheet Balance Sheet Income Statement Balance Sheet Income Statement Income Statement Balance Sheet Balance Sheet Normal Balance Credit Debit Credit Credit Debit Credit Debit Debit Credit Debit Debit Credit Debit Debit Debit Debit Debit Credit Debit Credit Debit Debit Credit Debit (1) Debit Credit Debit Debit Credit Debit Credit Debit B Operating Expense Long-Term Liability Plant Asset C Current Asset Stockholders' Equity Intangible Asset Cost of Goods Sold Balance Sheet Balance Sheet Balance Sheet Income Statement Balance Sheet Income Statement Balance Sheet Income Statement Retained Earnings Statement Balance Sheet Balance...
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...INTRODUCTION TO ACCOUNTING SEMINAR (1) TRUE/FALSE (NOTE: Show any required calculations in your answers) 1. A corporation is a business that is legally separate and distinct from its owners. 2. Primary users of accounting information are accountants. 3. Accounting is thought to be the "language of business" because business information is communicated to users. 4. The role of accounting is to provide many different users with financial information to make economic decisions. 5. Accounting information users need reports about the economic activities and condition of businesses. 6. The primary role of accounting is to determine the amount of taxes a business will be required to pay to taxing entities. 7. Stakeholders use only accounting reports as the source of information to base all of their business decisions. 8. Managerial accounting information is used by external and internal users equally. 9. Financial accounting provides information to all users, while the main focus for managerial accounting is to provide information to the management. 10. A business is an organization that provides goods or services to their customers in exchange for money or other items of value. 11. Managerial accounting is primarily concerned with the recording and reporting of economic data and activities of an entity for use by stockholders, creditors, governmental agencies, and the public. 12. The cost concept is the basis for entering the exchange...
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...Pre-Test 1. Financial accounting is an information system that: tracks and records an organization's business transactions 2. Jeff Brown is the sole owner of Shoe Central, a small shoe shop. One day, he buys a used car for his personal use, and pays $2,000 from his checking account. The fact that this transaction has no effect on Shoe Central's financial accounts is an application of the: 3. Jeff Brown, owner of Shoe Central, a small shoe store, buys cleaning supplies for his store once every six months. The fact that his accountant writes off, or records as expenses, the full cost of the cleaning supplies when they are purchased, rather than each monthly accounting period as they are used, is an application of the: 4. Oliver Enterprises buys a new stamping machine for $10,000 at an auction held by a company in bankruptcy proceedings. The machine is a very good deal; Oliver would have paid about $12,000 to buy it in the open market. Which of the following statements best describes the application of the historical cost concept? 5. Tournas Sports receives a special order for 100 team jerseys. The customer pays the full amount, $2,000, at the time of the order. The jerseys will be delivered in two weeks. Choose the statement that best reflects the application of the revenue recognition concept at the time of the order: 6. On April 30, Jemison Engineering receives a special order for a swing set, to be delivered to the customer in a month's time. Jemison...
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...ACCT 212 (FINANCIAL ACCOUNTING) COMPLETE COURSE A+ Graded Tutorial Available At: http://hwsoloutions.com/?product=financial-accounting-complete-course Visit Our website: http://hwsoloutions.com/ Product Description ACCT 212 (FINANCIAL ACCOUNTING) COMPLETE COURSE, ACCT 212 COURSE PROJECT 1 PART A WEEK 3 ACCT 212 COURSE PROJECT 1 PART B WEEK 5 Scenario: You’ve just secured a new client in your accounting practice, the Rawls Repair Corporation, (RRC) a brand new small business specializing in bicycle repair… ACCT 212 Course Project 2 Week 7 P13-50A Top manager of O’Hare Products, Inc., have asked for your help in comparing the company’s profit performance and financial position with the average… ACCT 212 Midterm Exam (TCO 1) The Accounting Equation is used to develop the organization’s financial reports. (1) Describe what owners’ equity values would be if Assets are $100,000 and Liabilities are $27,000 by showing the Accounting Equation (10 points) and (2) provide an explanation of what accounts could be found in owners’ equity. (10 points) (Points : 20) (TCO 1) The Accounting Equation is used to develop the organizations financial reports. (1) Describe what assets value would be if Liabilities are $12,000 and Owners’ Equity is $50,000 by showing the Accounting Equation (10 points) and (2) provide an example of two asset accounts that could contain the value. (10 points) (Points : 20) (TCO 1) The financial statements present a company to the public in financial...
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...Chapter 15: Understanding Accounting and Financial Statements Introduction The purpose of this chapter is to identify some of the concepts of Understanding Accounting and Financial Statements in the business world. Learning objectives 1. Explain the functions of accounting, and identify the three basic activities involving accounting. 2. Describe he roles played by public, management, government, and not-for-profit accountants. 3. Identify the foundations of the accounting system, including GAAP and the role of the Financial Accounting Standards Board (FASB). 4. Outline the steps in the accounting cycle, and define double-entry bookkeeping and the accounting equation. 5. Explain the functions and major components of the four principal financial statements: the balance sheet, the income statement, the statement of owner’s equity, and the statement of cash flows. 6. Discuss how financial ratios are used to analyze a company’s financial strengths and weaknesses. 7. Describe the role of budges in a business. 8. Outline accounting issues facing global business and the move towards one set of worldwide accounting rules. 1. Explain the functions of accounting, and identify the three basic activities involving accounting. Accounting measure, interpret, and communicate financial information to parties inside and outside the firm to support improved decision making. Accountants gather, record, and interpret financial information to management....
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...UNIVERSITY Principles of Accounting I CH-1 Part I. Evolution of Accounting Accounting is an old and time –honored discipline .History indicates that all developed societies require certain accounting records. Record keeping is an accounting sense is thought to have begun about 4000 B.C. The record keeping, control & verification problems of the ancient world had many characteristics similar to those we encounter today. For example, ancient government also kept records of receipts and disbursements and used procedures to check the honesty and reliability of employees. A study of the evolution of accounting suggests that accounting processes have developed primarily in response to business needs. Also, economic progress has affected the development of accounting processes. History shows that the higher the levels of civilization, the more elaborate the accounting methods. 1.1 Primitive Accounting People in all civilizations have maintained various types of records of business activities. The oldest known are clay tablet records of the payment of wages in Babylonia around 3,600 B.C. There are numerous evidences of record keeping and systems of accounting control in ancient Egypt and in the Greek city– states. The earliest known English records were compiled at the direction of William the conqueror in the eleventh century to ascertain the financial resources of the kingdom. Even though they used it in different activities, Primitive accounting had various shortcomings...
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