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Chapter
1-1
Accounting in
Business
Chapter
1-2
Study Objectives
Chapter
1-3
Accounting in Action
Chapter
1-4
What is Accounting?
Chapter
1-5 SO 1 Explain what accounting is.
What is Accounting?
Three Activities
Illustration 1-1
Accounting process
Chapter
1-6 SO 1 Explain what accounting is.
Who Uses Accounting Data?
Internal Users
Management IRS
Human Investors
Resources
There are two broad
groups of users of Labor
financial information: Unions
Finance
internal users and
external users. Creditors
Marketing
SEC
Customers External
Users
Chapter
1-7 SO 2 Identify the users and uses of accounting.
Who Uses Accounting Data?
Common Questions Asked User
1. Can we afford to give our
employees a pay raise? Human Resources
2. Did the company earn a
satisfactory income? Investors
3. Do we need to borrow in the
near future? Management
4. Is cash sufficient to pay
dividends to the stockholders? Finance
5. What price for our product
will maximize net income? Marketing
6. Will the company be able to
pay its short-term debts? Creditors
Chapter
1-8 SO 2 Identify the users and uses of accounting.
Who Uses Accounting Data?
Discussion Question
Q1. “Accounting is ingrained in our society and it is
vital to our economic system.” Do you agree? Explain.
Review Question
Ethics are the standards of conduct by which one's
actions are judged as:
a. right or wrong.
b. honest or dishonest.
c. fair or not fair.
d. all of these options.
Financial Statements
Various users Balance Sheet
need financial Income Statement
Statement of Owner’s Equity
information Statement of Cash Flows
Note Disclosure
Chapter
1-12 SO 4 Explain generally accepted accounting principles and the cost principle.
The Building Blocks of Accounting
Chapter
1-13 SO 4 Explain generally accepted accounting principles and the cost principle.
The Building Blocks of Accounting
Chapter
1-14 SO 4 Explain generally accepted accounting principles and the cost principle.
Assumptions
Review Question
Combining the activities of Kellogg and General
Mills would violate the
a. cost principle.
b. economic entity assumption.
c. monetary unit assumption.
d. ethics principle.
Review Question
A business organized as a separate legal entity
under state law having ownership divided into
shares of stock is a
a. proprietorship.
b. partnership.
c. corporation.
d. sole proprietorship.
Owner’s
Assets = Liabilities +
Equity
Owner’s
Assets = Liabilities +
Equity
Assets
Owner’s
Assets = Liabilities +
Equity
Liabilities
Owner’s
Assets = Liabilities +
Equity
Owner’s Equity
Illustration 1-6
Illustration 1-6
Record/
Don’t Record
Discussion Question
Q1-18. In February 2010, Paula King invested
an additional $10,000 in her business, King’s
Pharmacy, which is organized as a proprietorship.
King’s accountant, Lance Jones, recorded this
receipt as an increase in cash and revenues. Is
this treatment appropriate? Why or why not?
1. +10,000 +10,000
1. +10,000 +10,000
2. -5,000 +5,000
3.
4.
5.
6.
7.
8.
9.
10.
1. +10,000 +10,000
2. -5,000 +5,000
3. -400 -400
4.
5.
6.
7.
8.
9.
10.
1. +10,000 +10,000
2. -5,000 +5,000
3. -400 -400
4. +250 -250
5.
6.
7.
8.
9.
10.
1. +10,000 +10,000
2. -5,000 +5,000
3. -400 -400
4. +250 -250
5. +5,100 +5,100
6.
7.
8.
9.
10.
1. +10,000 +10,000
2. -5,000 +5,000
3. -400 -400
4. +250 -250
5. +5,100 +5,100
6. -1,000 -1,000
7.
8.
9.
10.
1. +10,000 +10,000
2. -5,000 +5,000
3. -400 -400
4. +250 -250
5. +5,100 +5,100
6. -1,000 -1,000
7. -2,000 -2,000
8.
9.
10.
1. +10,000 +10,000
2. -5,000 +5,000
3. -400 -400
4. +250 -250
5. +5,100 +5,100
6. -1,000 -1,000
7. -2,000 -2,000
8. -140 -140
9.
10.
1. +10,000 +10,000
2. -5,000 +5,000
3. -400 -400
4. +250 -250
5. +5,100 +5,100
6. -1,000 -1,000
7. -2,000 -2,000
8. -140 -140
9. +750 +750
10.
1. +10,000 +10,000
2. -5,000 +5,000
3. -400 -400
4. +250 -250
5. +5,100 +5,100
6. -1,000 -1,000
7. -2,000 -2,000
8. -140 -140
9. +750 +750
Chapter
1-38
Transactions (Problem)
1. +10,000 +10,000
2. -5,000 +5,000
3. -400 -400
4. +250 -250
5. +5,100 +5,100
6. -1,000 -1,000
7. -2,000 -2,000
8. -140 -140
9. +750 +750
Owner’s Statement
Income Balance
Equity of Cash
Statement Sheet
Statement Flows
Chapter
1-40 SO 8 Understand the four financial statements and how they are prepared.
Financial Statements
Review Question
Net income will result during a time period when:
a. assets exceed liabilities.
b. assets exceed revenues.
c. expenses exceed revenues.
d. revenues exceed expenses.
Chapter
1-41 SO 8 Understand the four financial statements and how they are prepared.
Financial Statements
Income Statement
Chapter
1-42 SO 8 Understand the four financial statements and how they are prepared.
Financial Statements
equity has increased or For the Month Ended May 31, 2010
Chapter
1-44 SO 8 Understand the four financial statements and how they are prepared.
Financial Statements
Balance Sheet
Barone’s Repair Shop Reports the assets,
Balance Sheet liabilities, and owner’s
May 31, 2010
Assets
equity at a specific date.
Cash $ 7,680
Accounts receivable 630 Assets listed at the top,
Equipment 5,000 followed by liabilities
Total assets $ 13,310
Liabilities
and owner’s equity.
Accounts payable $ 250
Owner's Equity Total assets must equal
Barone's, capital 13,060 total liabilities and
Total liab. & equity $ 13,310
owner’s equity.
Chapter
1-46 SO 8 Understand the four financial statements and how they are prepared.
Financial Statements
Review Question
Which of the following financial statements is
prepared as of a specific date?
a. Balance sheet.
b. Income statement.
c. Owner's equity statement.
d. Statement of cash flows.
Chapter
1-50 SO 8 Understand the four financial statements and how they are prepared.
Financial Statements
Discussion Question
Q1-19. “A company’s net income appears
directly on the income statement and the
owner’s equity statement, and it is included
indirectly in the company’s balance sheet.” Do
you agree? Explain.
Chapter
1-51 SO 8 Understand the four financial statements and how they are prepared.
Accounting Career Opportunities
Public Accounting
Careers in auditing and taxation serving the general public.
Private Accounting
Careers in industry working in cost accounting, budgeting,
accounting information systems, and taxation.
Opportunities in Government
Careers with the IRS, the FBI, the SEC, and in public
colleges and universities.
Forensic Accounting
Careers with insurance companies and law offices to conduct
investigations into theft and fraud.
Chapter
1-52 SO 9 Explain the career opportunities in accounting.