Chapter 1 1.

Nature of Business and Accounting You can probably list some examples of companies like Indofood with Products that you are familiar, with which you have recently done Business. Tour examples might be large companies, such as the Coca Cola Company, Astra International, or Indosat. They might be local companies, such as gas stations or grocery stores. In general a Binessis is an organization in which basic Resources (inputs), such as materialsand labor, are assembled and processed to provide goods or servics to customers. Busniness come in all sizes, from local Coffee house or warung kopi to an Indofood who Products a wide range of food Products. The obective of most businesses is to maximize profit. Profit is the difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide the goods or services. Some businesses operate with an objective other than to maximize profit. The obective of such not for profit businesses ie to provide some benefit to society, such as medical Research or Conservation of natural Resources. a. Types of Business Three are Three different types of businesses that are operated for profit; service, merchandising, and manufacturing businesses. Each type of Business has unique characteristic. Service businesses provide services rather than Products to costumers. Examples of service businesses and the types of services they ofter are shown below. Service Business Plaza Indonesia reality tbk Hotel Sahid Jaya Tbk. Bank mandiri Tbk Garuda Indonesia Inodosat Tbk. Service shopping mall Hospitality and lodging Finalncial Services Transportation Telecommunication

Merchandising businesses sell Products they purchase from other businesses to customers. In this sense, merchandisers bring Products and costumers together. Examples of merchandising businesses and some of the Products they sell are shown below.

Merchandising Businesesses Matahari Putra Prima Tbk. Hero Supermarket Tbk. Toko Gunung Agung Tbk. Ace hardware Indonesia Tbk. Alfa Retailindo Tbk.

Product Clothes and apparel Food and groceries Books and stationaries Consumer Electronics Consumer goods

Manufacturing Businesses change basic inputs into Products that are sold to individual costumers. Examples of manufacturing businesses and some of their Products are as follows Manufacturing Business Sepatu Bata Tbk. Mustika Ratu Tbk. Gudang Garam Tbk. Mayora Indah Tbk, Kalbe Farma Tbk Types Of Business Entities The Common forms of Business entities in Indonesia are proprietorship, partnership, Corporation and cooperatives (koperasi). Each of these forms and their major characteristic are listed below. A. A proprietorship is owned by one individual . . Most of Business entities in Indonesia is proprietorship. Cost of organizing is low. Product Shoes Cosmetics Ciggarettes Food and Beverages Pharmaceutical

B. A Partnership is similar to a proprietorship except that is owned by two or individuals . In Indonesia we know Firma and cv as two types of partnership. Firma and CV will be discussed more in chapter 12 . Combines the skills and Resources of more than one person.

Business Stakeholders A Business stakeholder is a person or entity that has an interest in the Economic performance and well being of a Business. Capital Market stake holders provide the major financing for the Business in order for the Business to begin and countinue its operations. Product or service Market stakeholders include customers who purchase the businesss Products or services as well as the vendors who supply inputs to the Business. Government stakeholders have an interest in the Economic performance of bussinesess Internal stakeholders include individuals employed by the Business. The role of accounting in bussiness Accounting is an information system that provides reports to stakeholders about the Economic Activities and condition of a Business

Profession of Accounting Financial accounting is primarily concerned with the recording and reporting of Economic data and Activities for a Business

Business Entity concept The individual Business unit is the Business entity for which Economic data are needed. The Business entity concept is important because it limit the Economic data in the accounting system to data related directly to the Activities Business

The Accounting Equation The Resources owned by a Business are its Asset. Examples of Asset include cash, land Building, and equipment, the right of creditors and the Rights of owners.the right creditors represent debt of the Business anda re called liabilities. The Rights of the owners are called owners equity. The relationship between the two may be stated in the form of an equation, as follow

Assets = Liabilities + Owners Equity This Equation is know as the accounting equation. Liabilities usually are shown before owners equity in the accounting because creditors have First right to the Asset. The claim of the owners is sometimes given greater emphasis by transporsing liabilities to the other side of the equation, which yields

Assets liabilities = Owners Equity To illustrate, if the Asset owned by a Business amount to Rp100,000,000 and the liabilities amount to Rp30,000,000, the owners equity is equal to Rp70,000,000, as shown below.

Assets Liabilities = Owners Equity Rp100,000,000 Rp30,000,000 = Rp70,000,000

Financial statements After transactions have been recorded and summarized, reports are prepared for users. The accounting reports that provide this information are called Financial statements. Income Statement The income statement reports the revenues and expenses for a periode time,based on the matching concept. This concept is a applied by macthing the expenses with the revenue generated during a periode by those expenses. The i

income statement also reports the excess of the revenue over the expenses is called net income or net profit. If the expenses exceed the revenues, the excess is a net loss

Balance Sheet Financial statements are used to evaluate the current financial conditional of a Business and to predict its future operating results and cash flows. For example, bank loan officers use a businesss financial statements in deciding whether to grant a loan to the Business. Once the loan is granted, the borrowe may be required to maintain a certain level of Asset in ecess of liabilities. The businesss financial statements are used to monitor this level

Statement of cash flows The statement of cash flows consists of Three sections. 1. Operating Activities 2. Investing Activities 3. Financing Activities

Interrelationships among financial statements 1. The income statement and the statement of owners equity are interrelated. The net income or net loss appears on the income statement and also on the statement and also on the statemenet and also on the statement of equity as either an addition to or deduction from the beginning owners equity and any additional Investment by the owner during the periode 2. The statement of owners equity and the balance sheet interrlated. The owners capital at the end of the periode on the statement of owners equity also appears on the at the balance sheet as owners capital. 3. The balance sheet and the statement of cash flows are interrelated. The cash on the balance sheet also appears as the end end of periode cash on the statement of cash flows.