FINANCIAL ACCOUNTING
Chapter 1
INTRODUCTION TO ACCOUNTING
AND BUSINESS
NGUYEN THI KIM
Date: Saturday, 15 September
CONTENT
1. Business & Accounting
2. Accounting equation, elements of the
equation
3. Business transactions change basic
elements of accounting equation
4. Financial statements of a proprietorship
and the interrelate
Nature of a business
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Definition detail
Types of business detail
Types of business organizations detail
Business strategies detail
BUSINESS STAKEHOLDERS
• A Business stakeholder
– person or entity having interest in the economic
performance of the business.
• Accounting, an information system
– provides reports to stakeholders
– about economic activities and condition of a business
Business ethics
• Moral principles
– guide the conduct of individuals →ethics.
• Proper ethical conduct
– not only consider your best interest
– but also best interest of others
Profession of accounting
• Accountant →business firm, not-for-profit
organization
– private accounting
• Accountant provide services on a fee basis
– public accounting
Profession of accounting (Cont.)
•Management accountant,
Private
•Industrial/cost accountant,
accounting •Chief/controller,
•Certified management
accountant (CMA)
Public
accounting
Certified Public
Accountant (CPAs)
Specialized accounting fields
• Financial accounting:
– Recording, Reporting
economic data and activities for a business.
• Managerial/management accounting:
– Uses financial accounting, estimated data
– Management day-to-day operations
– Planning future operations.
Generally accepted accounting
principles
• GAAP
– followed by financial accountants
– reports able to compare between companies
• Financial Accounting Standards Boards (FASB)
– authoritative body
primary responsibility for developing accounting principles.
Business entity concept
• Business activities are recorded separately
from the activities of the stakeholders
• Cost concept
– basis for entering the exchange price
• Objectivity concept
– accounting records and reports based on objective evidence.
• Unit of measure concept
– economic data recorded in dollars.
– Money is common unit measurement
Business transactions and the
accounting equation
• Business transaction:
– economic event/condition
– changes entity’s financial condition
– directly affects its results of operations
•
example
Financial statements
• Income statement:
– a summary of revenue and expenses
– for a specific period of time
• Statement of owner’s equity:
– A summary of the changes in the owner’s equity
– occurred during a specific period of time
• Balance sheet:
– a list of the assets, liabilities, and owner’s equity
– as of a specific date,
• Statement of cash flows:
– a summary of the cash receipts and cash payments
– for a specific period of time, such as a month or a year
Company Name
Income Statement
For the month/year ended ….
Fees earned
$1,000
Operating expenses
$350
- Supplies
- Salary
$550
$900
Total operating expenses
$100
Net income
Company Name
Statement of Owner's Equity
For the month/year ended ….
$20,000
Capital at (beginning period)
$5,000
Additional investment by owner
$100
Net income for the period
Less withdrawals
Increase in owner's equity
Capital at (ending period)
$200
$4,900
$24,900
Company Name
Balance Sheet
At Month Day, Year
Asset
Liabilities
Cash
$
Accounts receivable $
Owner's equity
Supplies
$
Capital
Land
$
total liability &
Total assets
$
Owner's equity
$
$
$