İntroduction to Business 2
BUS 102
Erlan Bakiev, Ph. D.
Zirve University
BUS 102
Basic Accounting
Concepts
What Is Accounting?
Financial
Accounting
Management
Accounting
Decision Making
Interpreting
Measuring
Communication
What Accountants Do
Bookkeeping
Cost
Accounting
Tax
Accounting
Financial
Analysis
Ten Most Important
Accounting Skills
• Analytical
• Leadership
• Problem solving
• Decision making
• Interpersonal
• Time management
• Listening
• Teamwork
• Communication
• Computer
Types of Accountants
Private
CPA
CMA
Internal
Audit
Public
CPA
External
Audit
Typical Finance Department
Board of
Directors
President
Vice President
Sales
Vice President
Finance
Treasurer
Credit
Manager
Inventory
Manager
Vice President
Manufacturing
Controller
Director
of Capital
Budgeting
Cost
Accounting
Financial
Accounting
Tax
Department
Accounting Rules
Generally Accepted
Accounting Principles
(GAAP)
Financial Accounting
Standards Board
(FASB)
International
Securities and
Accounting Standards Exchange Commission
(IAS)
(SEC)
Sarbanes-Oxley Act
Advantages
Disadvantages
Authority of Auditors
Implementation
Conflict of Interest
Cost of Compliance
Investor Protection
Enforcement Issues
Corporate Accountability
Reporting Requirements
Fundamental
Accounting Concepts
Accounting Equation
Double-Entry
Bookkeeping
Matching Principle
Critical Thinking
1. What effect does unreliable or uncertain
accounting have on Turkish economy?
2. Do Turkish companies need to worry about
accounting rules and regulations in other
countries? Why or why not?
3. Will requiring CEOs to personally attest to the
accuracy of financial statements eliminate
errors and misrepresentations? Why or why
not?
Accounting Equation
Owner’s Equity:
Assets – Liabilities = Owner’s Equity
Accounting Equation:
Assets = Liabilities + Owner’s Equity
Maintaining Balance
Double-Entry
Bookkeeping
Revenues
Expenses
Assets
Liabilities
Matching
Principle
Accrual
Basis
Cash
Basis
Critical Thinking
1. Would the current amount of the owner’s equity
be a reasonable price to pay for a company?
Why or why not?
2. How does a double-entry bookkeeping help to
eliminate errors?
3. Why is accrual-based accounting considered
more fraud-proof than cash-based accounting?
How Are Financial Statements Used?
Understanding Financial
Statements
Balance Sheet
Income Statement
Cash-Flow Statement
The Balance Sheet
Statement of Financial Position
Calendar
Year
Assets
Fiscal
Year
Liabilities
Owners’ Equity
The Income Statement
Revenues
Cost of Goods Sold
Operating Expenses
Net Operating Income
Net Income After Taxes
Cash-Flow Statement
Operations
Investments
Financing
Critical Thinking
1. Why is the balance sheet sometimes compared
to a photograph?
2. How could two companies with similar gross
profit end up with dramatically different net
operating income?
Analyzing
Financial Statements
Trend Analysis
Ratio Analysis
Uncover Business Shifts
Consider More
Than One Ratio
Consider Extraordinary
Circumstances
Check Specific Data
Types of Financial Ratios
Profitability
Liquidity
Activity
Leverage
Profitability Ratios
Return on Sales =
Net Income
Net Sales
Return on Equity =
Net Income
Total Owner’s Equity
Earnings per Share =
Net Income
Average Shares Outstanding
Liquidity Ratios
Working Capital =
Current Assets –
Current Liabilities
Current Ratio =
Current Assets
Current Liabilities
Quick Ratio =
Current Assets – Liabilities
Current Liabilities
Activity Ratios
Inventory Turnover =
Cost of Goods Sold
Average Inventory
Receivables Turnover =
Sales
Average Accounts Receivable
Leverage Ratios
Debt to Equity =
Total Liabilities
Total Equity
Debt to Total Assets =
Total Liabilities
Total Assets