Professional Documents
Culture Documents
Introduction to
Accounting and
Business
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2.
3.
4.
5.
6.
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11.
1-1
Objective
Objective 11
Describe the nature of a
business and types of business
organization
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Types of Businesses
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Service
ServiceBusiness
Business
Service
Service
The
TheWalt
WaltDisney
DisneyCompany
Company
Malaysia
MalaysiaAirlines
AirlinesSystem
System(MAS)
(MAS)
Maybank
MaybankCorporation
Corporation
Marriott
MarriottInternational
InternationalHotels
Hotels
KPMG
KPMG
Entertainment
Entertainment
Transportation
Transportation
Financial
Financialservices
services
Hospitality
Hospitalityand
andlodging
lodging
Auditing
Auditing
Types of Businesses
1-1
Merchandising
Merchandising Business
Business Product
Product
Giant
Giant
Amazon.com
Amazon.com
Toy
ToyR
RUs
Us
Panasonic
Panasonic
Gap
GapInc.
Inc.
General
Generalmerchandise
merchandise
Internet
Internetbooks,
books,music,
music,video
video
Toys
Toys
Consumer
Consumerelectronics
electronics
Apparel
Apparel
Types of Businesses
Manufacturing
Manufacturing Business
Business
Product
Product
General
GeneralMotors
MotorsCorporation
Corporation
Nokia
Nokia
Dell
DellInc.
Inc.
Nike
Nike
FF&
&NNCompany
Company
Sony
SonyCorporation
Corporation
Cars,
Cars,trucks,
trucks,vans
vans
Cell
Cellphones
phones
Personal
Personalcomputers
computers
Athletic
Athleticshoes
shoesand
andapparel
apparel
Beverages
Beverages
Stereos
Stereosand
andtelevisions
televisions
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Proprietorship
Partnership
Corporation
Limited liability company
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Proprietorship
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Partnership
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11
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Corporation
1-1
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A business stakeholder is a
person or entity having an interest
in the economic performance and
well-being of a business.
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Government stakeholders
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Objective
Objective 22 and
and 33
12-3
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19
WhyClick
ethics?to
12-3
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20
1-4
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1-4
Accounting
an information system that provides
reports to stakeholders about the
economic activities and condition of a
business.
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22
1-5
Objective
Objective 55
Identify the users and uses of the
accounting information
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Internal users
eg. marketing managers, production supervisors,
finance directors, and company officers.
they need detailed information like financial
comparison of operating alternatives, projection of
income from new sales, and forecasts of cash needs
for the coming year on a timely basis in running the
business.
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in the company.
Tax authority check for companys tax compliance.
Security Commission (SC) to make sure that company is operating
within the prescribed rules.
Customers observe whether company continues to maintain product
quality and warranty and then decide whether to continue supporting
its products.
Labour union want to know whether company can afford to give
pay
raises or benefits.
Economic planners to forecast economic activities.
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The process
which
accounting
provides
information to business stakeholders is as follows:
1-5
Identify stakeholders.
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1-1
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1-6
Objective
Objective 66
Describe the role of the accounting
profession in business and specialized
accounting fields
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Objective
Objective 77
Explain the meaning of GAAPs
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1-7
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1-8
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When developing GAAPs, there are certain basic
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assumptions made.
The assumptions provide a foundation for the
accounting process.
There are four main basic accounting
assumptions:
[i] Economic Entity Assumption
[ii] Going Concern Assumption,
[iii] Time Period Assumption, and
[iv] Monetary-unit Assumption.
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1-8
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Example 1
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?
Follow My Example
$137,000. Under the cost concept, the land should be recorded at
the cost to Gallatin Repair Service.
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Example 2
Follow My Example
a.
A = L + OE
b.
$800,000 = $350,000 + OE
OE = $450,000
A = L + OE
$130,000 = $25,000 + OE
OE = $155,000
OE on Dec. 31, 2009:
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$605,000 ($450,000 + $155,000)
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Objective
Objective 10
10
Analyze the effects of business
transactions on the basic elements
of the accounting equation.
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A business transaction is an
economic event or condition that
directly changes an entitys
financial condition or directly
affects its results of operations.
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Cash
25,000
=
=
Owners Equity
Kris Klarah, Capital
25,000 Investment
by Kris
Klarah
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50
=
=
Owners Equity
Kris Klarah, Capital
25,000
25,000
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Owners
Liabilities + Equity
Accounts
Kris Klarah,
Payable
Capital
20,000
+1,350
1,350
20,000
25,000
+1,350
1,350
25,000
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Assets
Cash + Supplies + Land
5,000
1,350
20,000
Bal.
d. +7,500
12,500
Bal.
1,350
20,000
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Liabilities +
Owners Equity
Accounts
Kris Klarah,
Fees
Payable +
Capital + Earned
Bal.
1,350
25,000
+7,500 d.
1,350
25,000
7,500 Bal.
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54
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Expenses
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Assets
Cash + Supplies + Land
Bal. 12,500
1,350
20,000
e. 3,650
Bal. 8,850
1,350
20,000
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25,000
7,500
2,125
800
450
2,125
800
450
Misc.
e.
275
275
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Assets
Cash + Supplies + Land
Bal. 8,850
1,350
20,000
f. 950
Bal. 7,900
1,350
20,000
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Liabilities +
Owners Equity
Accounts
Kris Klarah,
Fees
Wages
Rent
Utilities
Misc.
Payable + Capital + Earned Expense Expense Expense
Expense
800
450
275
1,350
25,000
7,500 2,125
f.
950
400
25,000
7,500
2,125
800
450
275
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800
550
20,000
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Owners Equity
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25,000
7,500
2,125
800
450 275
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Assets
Cash + Supplies + Land
Bal. 7,900
550
20,000
h. 2,000
Bal. 5,900
550
20,000
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Rent
Exp.
450 275
h.
2,000
400
25,000
2,000
7,500 2,125
800
800
450
275
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Decreased by
Owners
investments
Owners
withdrawals
Revenues
Expenses
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Example 3
Salyo Delivery Service is owned and operated by Jo Salyo.
The following selected transactions were completed by
Salyo 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 owners for personal use, $1,000.
Continued
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Example 3
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Follow My Example
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Balance Sheet
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Income Statement
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Example 4
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$ 12,200
31,350
53,050
263,200
80,000
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Follow My Example
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Example 5
Using the data for Chickadee Travel Service shown
in Example 4, prepare a statement of owners
equity for the current year ended April 30, 2009.
Adam Che Lini invested an additional $50,000 in
the business during the year and withdrew cash of
$30,000 for personal use.
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Follow My Example
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$ 80,000
$ 50,000
55,550
$105,550
30,000
75,550
$155,550
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Balance Sheet
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Example
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Follow My Example
CHICKADEE TRAVEL SERVICE
BALANCE SHEET
Assets
Cash
Accounts receivable
Supplies
Land
Total assets
Liabilities
$ 53,050 Accounts payable
$12,200
31,350
3,350
Owners Equity
80,000 Adam Cellini, capital
155,550
$167,750 Total liab. & owners eq. $167,750
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Example 7
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A summary of cash flows for Chickadee Travel Service for the
year ended April 30, 2009, is shown below.
Cash receipts:
Cash received from customers
Cash received from additional
investment of owner
Cash payments:
Cash paid for expenses
Cash paid for land
Cash paid to owner for personal use
$251,000
50,000
210,000
80,000
30,000
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Follow My Example
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TRAVEL SERVICE
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$ 41,000
(80,000)
20,000
$(19,000)
72,050
$ 53,050
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