CH 1 Lecture PPT-26E-2

Welcome to ACCT 1100
Instructor: Wendy Schuster, CPA

Course Syllabus
Angel
Cengage
Begin Chapter 1
Things to know about Mrs. Schuster
I expect the following behaviors:

o
o
o
o
Read the chapter before coming to class

Be in class and on time; plan ahead
Take responsibility for your own actions
Cell phones and computers put away
In return, I will help you any way I can
Things to know about Angel & CengageNOW
Angel
o
Lessons
o
o
Getting Started Activities

Assignment instructions and due dates
Power Points
Handouts
Video Links
Announcements
Gradebook (All grades transferred to Angel)
CengageNOW
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Assignments/Homework
Quizzes
Things to know about Homework Assignments
Eight Chapters (No assignment for Chapter 5)

o Completed through CengageNOW
To register, follow the directions on the CengageNOW
Boarding Pass, found in Angel under Lessons/Getting
Started/Course Information
o Due dates in CengageNOW
o Assignments
Adaptable learning activity with a pre-test and post-test
o
Homework
Algorithmic problem selections from your book
You get five check my work opportunities and three submits
o
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Assignments/Homework do not re-open once closed

Solutions are not posted
Lowest grade NOT dropped
Things to know about Quizzes
Eight Chapter Quizzes

o Opens in CengageNOW the day we finish the chapter
All due dates listed in Angel and CengageNOW
Open for six days and do not re-open once closed
Shuts down at 11:55 pm on the due date
Dont procrastinate
Internet connection and Cengage problems are no excuse
o 20 multiple choice questions, 90 minutes
o Lowest quiz grade dropped by Angel
Things to know about Exams
Two Exams
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o
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Dates in Syllabus
Review the class before the exam
Allowed: Note card, calculator, pencil, erasers (no
cell phones)
Make your note card and use it to complete the review
assignments
o
o
Lowest grade NOT dropped

No make-ups allowed unless pre-arranged with me
How To Pass ACC 1100
Complete all reading before class

o
We begin the next chapter immediately following

completion of the previous (except when we have a
test)
Complete all assignments; If you are absent, you

are responsible for any missed work.
Attend all Classes and be on-time

Ask Questions
Make a Friend; Make several Friends
C H AP T E R
Introduction to Accounting
and Business
Warren
Reeve
Duchac
human/iStock/360/Getty Images
Accounting
26e
Types of Businesses
Service Businesses
Service
Delta Air Lines
Transportation services
The Walt Disney Company
Entertainment services
Merchandising Businesses
Product
Walmart
General merchandise
Amazon.com
Internet books, music, videos
Manufacturing Businesses
Product
Ford Motor Co.
Cars, trucks, vans
Dell Inc.
Personal computers
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
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.
The process by which accounting provides
information to users is as follows:
o
o
o
o
o
Identify users.
Assess users information needs.
Design the accounting information system to
meet users needs.
Record economic data about business activities
and events.
Prepare accounting reports for users.
Accounting as an Information System
Managerial Accounting
The area of accounting that provides

internal users with information is called
managerial accounting, or
management accounting.
Managerial accountants employed by a
business are employed in private
accounting.
Financial Accounting
The area of accounting that provides

external users with information is called
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.
General-purpose financial statements
are one type of financial accounting report
that is distributed to external users.
Role of Ethics in Accounting and Business

(slide 1 of 3)
The objective of accounting is to provide

relevant, timely information for user
decision making.
Accountants must behave in an ethical
manner so that the information they
provide users will be trustworthy and,
thus, useful for decision making.
Ethics are moral principles that guide the
conduct of individuals.
Accounting and Business Frauds

(slide 2 of 3)
What went wrong for these

managers and companies?
The answer to the preceding question

normally involved one or both of the
following two factors:
o
o
Failure of individual character

Culture of greed and ethical indifference

(slide 3 of 3)
Guidelines for behaving ethically follow:

1.
2.
3.
4.
Identify an ethical decision by using your

personal ethical standards of honesty and
fairness.
Identify the consequences of the decision and
its effect on others.
Consider your obligations and responsibilities
to those who will be affected by your decision.
Make a decision that is ethical and fair to those
affected by it.
Opportunities for Accountants
Accountants and their staff who provide

services on a fee basis are said to be
employed in public accounting.
Accountants employed by a business firm,
government, or a not-for-profit
organization are said to be employed in
private accounting.
Public accountants who have met a states
education, experience, and examination
requirements may become Certified
Public Accountants (CPAs).
Accounting Career Paths and Salaries
Generally Accepted Accounting Principles
Financial accountants follow generally accepted

accounting principles (GAAP) in preparing
reports.
Within the U.S., the Financial Accounting
Standards Board (FASB) has the primary
responsibility for developing accounting
principles.
The Securities and Exchange Commission
(SEC), an agency of the U.S. government, has
authority over the accounting and financial
disclosures for companies whose shares of
ownership (stock) are traded and sold to the
public.
Many countries outside the U.S. use generally
accepted accounting principles adopted by the
Business Entity Concept
Under the business entity concept, the

activities of a business are recorded
separately from the activities of its
owners, creditors, or other businesses.
Forms of Business Entities
Cost Concept
(slide 1 of 3)
Under the cost concept, amounts are

initially recorded in the accounting records
at their cost or purchase price.
Aaron Publishers purchased a building on
February 20, 2014, for $150,000. Other
amounts related to this purchase are
shown on the next slide.
Cost Concept
(slide 2 of 3)
Under the cost concept, Aaron Publishers records

the purchase of the building on February 20,
2014, at the purchase price of
$150,000.
The other amounts listed above have no effect on
the accounting records.
Cost Concept
(slide 3 of 3)
The cost concept also involves the

objectivity and unit of measure concepts.
o
The objectivity concept requires that the

amounts recorded in the accounting records be
based on objective evidence.
Only the final agreed-upon amount is objective
enough to be recorded in the accounting records.
The unit of measure concept requires that

economic data be recorded in dollars.
Cost Concept
Example
Exercise
On August 25, Gallatin Repair Service
extended an offer of $125,000 for land that

had been priced for sale at $150,000. On
September 3, Gallatin Repair Service
accepted the sellers counteroffer of
$137,000. On October 20, the land was
assessed at a value of $98,000 for property
tax purposes. On December 4, Gallatin
Repair Service was offered $160,000 for the
land by a national retail chain. At what value
should the land be recorded in Gallatin
Repair Services records?
PE 1-1B
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in
part.
The Accounting Equation

(slide 1 of 4)
The resources owned by a business are its

assets.
The rights of creditors are the debts of the
business and are called liabilities.
The rights of the owners are called
owners equity.
The equation Assets = Liabilities +
Owners Equity is called the accounting
equation.

(slide 2 of 4)
Assets = Liabilities + Owners Equity
The resources
owned by a
business

(slide 3 of 4)
The rights of
creditors are the
debts of the
business

(slide 4 of 4)
The rights of the

owners
Example
Exercise
John Joos is the owner and operator of Youre
Accounting Equation
(slide 1 of 2)
A Star, a motivational consulting business.

At the end of its accounting period,
December 31, 2015, Youre A Star has assets
of $800,000 and liabilities of $350,000.
Using the accounting equation, determine
the following amounts:
a. Owners equity as of December 31, 2015.
b. Owners equity as of December 31, 2016,
assuming that assets increased by
$130,000 and liabilities decreased by
$25,000 during 2016.
part.
Example
Exercise
Accounting Equation
(slide 2 of 2)
Exercise 6
part.
Business Transactions and

the Accounting Equation
A business transaction is an economic

event or condition that directly changes an
entitys financial condition or its results of
operations.
Transaction A
On November 1, 2015, Chris Clark

deposited $25,000 in a bank account in
the name of NetSolutions.
Transaction B
On November 5, 2015, NetSolutions paid

$20,000 for the purchase of land as a
future building site.
Transaction C
On November 10, 2015, NetSolutions purchased

supplies for $1,350 and agreed to pay the supplier
in the near future.
The liability created by a purchase on account is

called an account payable.
Items such as supplies that will be used in the
business in the future are called prepaid
expenses, which are assets.
Transaction D
(slide 1 of 3)
A business earns money by selling goods

or services to its customers. This amount
is called revenue.
Transaction D
(slide 2 of 3)
On November 18, 2015, NetSolutions

received cash of $7,500 for providing
services to customers.
Transaction D
(slide 3 of 3)
Revenue from providing services is

recorded as fees earned.
Revenue from the sale of merchandise is
recorded as sales.
Other examples of revenue include rent,
which is recorded as rent revenue, and
interest, which is recorded as interest
revenue.
An account receivable is a claim against
a customer, which is an asset.
Transaction E
(slide 1 of 2)
During the month, NetSolutions spent

cash or used up other assets in earning
revenue. Assets used in this process of
earning revenue are called expenses.
Transaction E
(slide 2 of 2)

the following expenses: wages, $2,125;
rent, $800; utilities, $450; and
miscellaneous, $275.
Transaction F

creditors on account, $950.
Transaction G

determined that the cost of supplies on
hand at the end of the month was $550.
Transaction H

withdrew $2,000 from NetSolutions for
personal use.
Summary of Transactions for NetSolutions
Types of Transactions
Affecting Owners Equity
Transactions (slide 1 of 2)
Example
Exercise
Salvo Delivery Service is owned and operated by Joel Salvo.
The following selected transactions were completed by Salvo

Delivery Service during February:
1. Received cash from owner as additional investment,
$35,000.
2. Paid creditors on account, $1,800.
3. Billed customers for delivery services on account, $11,250.
4. Received cash from customers on account, $6,740.
5. Paid cash to owner for personal use, $1,000.
Indicate the effect of each transaction on the accounting
equation elements (Assets, Liabilities, Owners Equity,
Drawing, Revenue, and Expense). Also indicate the specific
item within the accounting equation element that is affected.
To illustrate, the answer to (1) follows:
part.
Example
Exercise
Transactions (slide 2 of 2)
Financial Statements
After transactions have been recorded and

summarized, reports are prepared for
users. The accounting reports providing
this information are called financial
statements.
Financial Statements
Income Statement
The income statement reports the

revenues and expenses for a period of
time, based on the matching concept.
The matching concept is applied by
matching the expenses incurred during a
period with the revenue that those
expenses generated.
The excess of the revenue over the
expenses is called net income, net
profit, or earnings. If expenses exceed
revenue, the excess is a net loss.
Income Statement
Example
Exercise
The revenues and expenses of Chickadee Travel
Service for the year ended April 30, 2016, follow:
Prepare an income statement for the year ended

April 30, 2016.
part.
Statement of Owners Equity
The statement of owners equity

reports the changes in the owners equity
for a period of time.
It is prepared after the income statement
because the net income or net loss for the
period must be reported in this statement.
Statement of Owners Equity

Example
Exercise
Using the income statement for Chickadee Travel
Service, prepare a statement of owners equity for

the year ended April 30, 2016. Adam Cellini, the
owner, invested an additional $50,000 in the
business and withdrew cash of $30,000 for personal
use during the year. The capital of Adam Cellini was
$80,000 on May 1, 2015.
part.
Balance Sheet
A balance sheet is a list of the assets,

liabilities, and owners equity as of a
specific date.
The account form of a balance sheet lists
the assets on the left and the liabilities
and owners equity on the right. It
resembles the basic format of the
accounting equation.
Balance Sheet
Example
Exercise
Using the following data for Chickadee Travel
Service as well as the statement of owners

equity, prepare a balance sheet as of April
30, 2016.
part.
Financial StatementsIncome Statement
Net income is carried

to the statement of
owners equity.
(continued)
Financial StatementsStatement of Owners

Equity
From the income

statement
To the balance
sheet
(continued)
Financial StatementsBalance Sheet
This amount is
compared to the
net cash flow on
the statement of
cash flows.
From the
statement of
owners equity
(continued)
Financial Statement Interrelationships
In-Class Assignment
Practice Exercises 4, 5, 6
Jims Lawn Care Handout

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Welcome to ACCT 1100

Instructor: Wendy Schuster, CPA

Things to know about Mrs. Schuster

I expect the following behaviors:

Read the chapter before coming to class

In return, I will help you any way I can

Things to know about Angel & CengageNOW

Getting Started Activities

Things to know about Homework Assignments

Eight Chapters (No assignment for Chapter 5)

Assignments/Homework do not re-open once closed

Things to know about Quizzes

Eight Chapter Quizzes

Things to know about Exams

Lowest grade NOT dropped

How To Pass ACC 1100

Complete all reading before class

We begin the next chapter immediately following

Complete all assignments; If you are absent, you

Attend all Classes and be on-time

Delta Air Lines

The Walt Disney Company

Internet books, music, videos

Ford Motor Co.

Cars, trucks, vans

Role of Accounting in Business

Accounting can be defined as an

Accounting as an Information System

The area of accounting that provides

The area of accounting that provides

Role of Ethics in Accounting and Business

The objective of accounting is to provide

Accounting and Business Frauds

Role of Ethics in Accounting and Business

What went wrong for these

The answer to the preceding question

Failure of individual character

Role of Ethics in Accounting and Business

Guidelines for behaving ethically follow:

Identify an ethical decision by using your

Opportunities for Accountants

Accountants and their staff who provide

Accounting Career Paths and Salaries

Generally Accepted Accounting Principles

Financial accountants follow generally accepted

Business Entity Concept

Under the business entity concept, the

Forms of Business Entities

Under the cost concept, amounts are

Under the cost concept, Aaron Publishers records

The cost concept also involves the

The objectivity concept requires that the

The unit of measure concept requires that

extended an offer of $125,000 for land that

The Accounting Equation

The resources owned by a business are its

The Accounting Equation

Assets = Liabilities + Owners Equity

The Accounting Equation

Assets = Liabilities + Owners Equity

The Accounting Equation

Assets = Liabilities + Owners Equity

The rights of the