accounting 1 mgt 130 lecture 02. overview of lecture 01 lecture 02
TRANSCRIPT
Accounting 1MGT 130
Lecture 02
• Overview of Lecture 01
• Lecture 02
•Lecture 02• Business Organizations – Proprietorships,
– partnerships
– corporations.
• Business Types–Manufacturing
–Merchandizing
– Services business.
• Business strategy
• Low-cost strategy
• Differential strategy
STAKEHOLDERS
Internal: Owners, managers, employees
External: Customers, creditors, government
The Process of Providing InformationThe Process of Providing InformationThe Process of Providing InformationThe Process of Providing Information
1. Identify stake-holders.
2. Assess stakeholders’ informational needs
3. Design the accounting information system to meet stakeholders’ needs
4. Record economic data about business activities and events
5. Prepare accounting reports for stakeholders
• Purpose of Information
• The Purpose of Accounting
• Accounting System
• Accounting
Accounting System
Financial Accounting Balance Sheet Income Statement Cash Flow Statement Statement of Changes in Owner’s Equity
Managerial AccountingCost Accounting
Distinction Between Financial Accounting and Managerial Accounting
• Users of information
• Regulations
• Source of Data
• Nature of Reports and Procedures
Accounting Equation
• Techniques of calculating – Assets,
– Liabilities and
– Owner’s equity
• Transactions in Accounting Equation
Fees earned Rs. 7500
Operating expenses:
Rent expense
Rs. 2125Wages expense
800
Supplies expense
450 Utilities expense
275 Miscellaneous expense
Total operating expenses 4450
Opportunities Inc.Income Statement
For the Month Ended November 30, 2010
800
Net income Rs.3050
Javid Iqbal, capital, November 1, 2010 Rs.
Opportunities Inc.Statement of Owner’s Equity
For the Month Ended November 30, 2010
Investment on November 1 Rs.25 000 Net income for November 3 050
Rs.28 050Less withdrawals 2 000 Increase in owner’s equity 26 050Javid Iqbal, capital, November 30, 2010 Rs.26 050
Javid Iqbal, capital, November 1, 2010 Rs.
Opportunities Inc.Statement of Owner’s Equity
For the Month Ended November 30, 2010
Investment on November 1 Rs.25 000Net income for November 3 050
Rs.28 050Less withdrawals 2 000Increase in owner’s equity 26 050Javid Iqbal, capital, November 30, 2010 Rs.26 050
Fees earned Rs. 7500
Operating expenses:
Rent expense
Rs. 2125Wages expense
800
Supplies expense
450 Utilities expense
275 Miscellaneous expense
Total operating expenses 4450
Opportunities Inc.Income Statement
For the Month Ended November 30, 2010
800
Net income Rs.3050
Javid Iqbal, capital, November 1, 2010 Rs.
Opportunities Inc.Statement of Owner’s Equity
For the Month Ended November 30, 2010
Investment on November 1 Rs.25 000Net income for November 3 050
Rs.28 050Less withdrawals 2 000Increase in owner’s equity 26 050Javid Iqbal, capital, November 30, 2010 Rs.26 050
Assets Liabilities
Opportunities Inc.Balance Sheet
November 30, 2010
Cash Rs, 5 900 Accounts Payable Rs. 400
Supplies 550 Owner’s Equity
Land 20 000 Javid Iqbal, cap. 26 050
Total liabilities and
Total assets Rs.26 450 owner’s equity Rs.26 450
This balance sheet presented using the account form
Cash Flows from Operating Activities—This section reports a summary of cash receipts and cash payments from operations.
Cash Flows from Investing Activities—This section reports the cash transactions for the acquisition and sale of relatively permanent assets.
Cash Flows from Financing Activities—This section reports the cash transactions related to cash investments by the owner, borrowings, and cash withdrawals by the owner.
Cash flows from operating activities:Cash received from customers Rs. 7 500Deduct cash payments for expenses and payments to creditors 4 600Net cash flow from operating activities 2 900
Cash flows from investing activities:Cash payment for acquisition of land (20 000
Cash flows from financing activities:
Cash received as owner’s investment Rs.25000
Deduct cash withdrawal by owner 2000Net cash flow from financing activities 23 000
Net cash flow and Nov. 30, 2005 cash bal. Rs. 5 900
Opportunities Inc.Statement of Cash Flows
For the Month Ended November 30, 2010
)
Assets Liabilities
Opportunities Inc.Balance Sheet
November 30, 2010
Cash Rs, 5 900 Accounts Payable Rs. 400
Supplies 550 Owner’s Equity
Land 20 000 Javid Iqbal, cap. 26 050
Total liabilities and
Total assets Rs.26 450 owner’s equity Rs.26 450
This balance sheet presented using the account form
Ratio of liabilities to owner’s equity
=Total Liabilities
Total owner’s equity (or total stockholders’ equity)
The ratio of liabilities to owner’s equity allows owners like Javid Iqbal to analyze the firm’s ability to withstand poor business conditions.
The ratio of liabilities to owner’s equity allows owners like Javid Iqbal to analyze the firm’s ability to withstand poor business conditions.
Ratio of liabilities to
owner’s equity=
Rs.400
Rs.26,050
= 0.015 / 15%Ratio of
liabilities to owner’s equity
Collective Transactions of Accounting equations
Treatment of these transactions
Income Statement
Statement of Owner’s Equity
Balance Sheet
Statement of Cash Flows
A list of the accounts in a ledger is called a chart of accounts.
CashSuppliesBuildingAccounts
receivable
Accounts payable
Notes payableWages payable
CashSuppliesBuildingAccounts
receivable
Accounts payable
Notes payableWages payable
Javid Iqbal, Capital
Javid Iqbal, Drawing
Fees EarnedFares EarnedCommission
Revenue
Rent ExpenseSalary ExpenseUtilities
Expense
Major Account ClassificationsMajor Account Classifications
Cash
Cash
Left side debit
Cash
Left side debit
Right side credit
Cash3,7504,3002,900
8501,400
7002,900
Typical entries
Cash3,7504,3002,900
8501,400
7002,90010,950
First, total the debit
side.
First, total the debit
side.
8501,400
7002,900
Cash3,7504,3002,900
10,9505,850
Next, total thecredit side.
Next, total thecredit side.
8501,400
7002,900
Cash3,7504,3002,900
10,9505,850
5,100
Transactions and Balance Sheet Accounts
Debits Credits
Asset accounts………. Increase (+) Decrease (-)
Liability accounts…… Decrease (-) Increase (+)
Owner’s equity (capital) accounts…. Decrease (-) Increase (+)
Rules of Debit / Credit Balance Sheet Accounts
Chapter 01Chapter 01
Lecture 02Lecture 02