Professional Documents
Culture Documents
Business Environment
Chapter 1
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
1-1
Objective 1
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
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Accounting...
isis an
an information
information system
system that...
that...
measures
measures business
business activities,
activities,
processes
processes information,
information, and...
and...
communicates
communicates financial
financial information.
information.
2002 Prentice Hall, Inc.
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
1-3
Accounting...
isis called
called the
the language
language of
of business.
business.
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
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External
External users
users
make
make decisions
decisions
about
about the
the entity.
entity.
Business Publishing
Internal
Internal users
users
make
make decisions
decisions
for
for the
the entity.
entity.
Accounting, 5/E
Horngren/Harrison/Bamber
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Fields of Accounting
Financial
Financial Accounting
Accounting
Management
Management Accounting
Accounting
2002 Prentice Hall, Inc.
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
1-6
Private
Private Sector
Sector
(FASB)
(FASB)
GAAP
GAAP
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
1-7
Standards of Professional
Conduct
AICPAs
AICPAs Code
Code of
of
Professional
Professional
Conduct
Conduct
Business Publishing
Standards
Standards of
of
Ethical
Ethical
Conduct
Conduct of
of the
the
Institute
Institute of
of
Management
Management
Accountants
Accountants
Accounting, 5/E
Horngren/Harrison/Bamber
1-8
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
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Proprietorships
What are some advantages?
total undivided authority
no restrictions on type of business must
be legal
What are some disadvantages?
unlimited liability
limitation on size fund raising power
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
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Partnerships
What are some advantages?
better credit standing possibly
more brain power, but consultation with
partners required
What are some disadvantages?
unlimited personal liability for general partners
need for written partnership agreement
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Accounting, 5/E
Horngren/Harrison/Bamber
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Corporations
What are some advantages?
separate legal existence
limited liability of stockholders
transferability of ownership relatively easy
What are some disadvantages?
taxes possible double taxation
extensive governmental regulation
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Accounting, 5/E
Horngren/Harrison/Bamber
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Objective 2
Apply accounting
concepts and principles
to business situations.
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
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Generally Accepted
Accounting Principles
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
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Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
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Accounting, 5/E
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Information
Information must
must
be
be free
free from
from bias.
bias.
Information
Information must
must
report
report what
what
actually
actually
happened.
happened.
Individuals
Individuals would
would
arrive
arrive at
at similar
similar
conclusions
conclusions using
using
same
same data.
data.
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Accounting, 5/E
Horngren/Harrison/Bamber
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Assets
Assets and
and services
services
acquired
acquired
should
should be
be recorded
recorded
at
at their
their actual
actual cost.
cost.
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
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The
The entity
entity will
will continue
continue
to
to operate
operate in
in the
the future.
future.
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Accounting, 5/E
Horngren/Harrison/Bamber
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The Stable-Monetary-Unit
Concept
The
The dollars
dollars purchasing
purchasing
power
power isis relatively
relatively
stable.
stable.
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
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Objective 3
Use the accounting equation
to describe an organizations
financial position.
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
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Assets
Economic
Resources
Business Publishing
Claims to
Economic
Resources
Accounting, 5/E
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Assets
What is an asset?
It is something a company owns which
has future economic value.
land
building
equipment
goodwill
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Accounting, 5/E
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Liability
What is a liability?
It is something a company owes.
money
service legal retainers
product magazines
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Accounting, 5/E
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Owners Equity
What is owners equity?
It is whats left of the assets after liabilities
have been deducted.
the same as net assets
the owners claim on the entitys assets
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Accounting, 5/E
Horngren/Harrison/Bamber
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OWNERS EQUITY
DECREASES
Owner Withdrawals
from the Business
Owner Investments
in the Business
Owners Equity
Revenues
2002 Prentice Hall, Inc.
Expenses
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Accounting, 5/E
Horngren/Harrison/Bamber
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Revenues
What are revenues?
They are amounts received or to be received
from customers for sales of products or services.
sales
performance of services
rent
interest
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Accounting, 5/E
Horngren/Harrison/Bamber
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Expenses
What are expenses?
They are amounts that have been paid or will be
paid later for costs that have been incurred to
earn revenue.
salaries and wages
utilities
supplies used
advertising
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Accounting, 5/E
Horngren/Harrison/Bamber
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Objective 4
Use the accounting equation to
analyze business transactions.
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Accounting, 5/E
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Accounting, 5/E
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Accounting, 5/E
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Business Publishing
Accounting, 5/E
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300
300
Totals
+ $35,600
+ 200
+ $35,400
2002 Prentice Hall, Inc.
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Accounting, 5/E
Horngren/Harrison/Bamber
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Accounting, 5/E
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Accounting, 5/E
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Objective 5
Prepare and use
financial statements.
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Accounting, 5/E
Horngren/Harrison/Bamber
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Financial Statements...
are
are the
the final
final
product
product of
of the
the
accounting
accounting process.
process.
tell
tell how
how the
the
business
business isis performing
performing
and
and where
where itit stands.
stands.
2002 Prentice Hall, Inc.
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
1 - 37
Financial Statements
income statement
statement of owners equity or retained
earnings
balance sheet
statement of cash flows
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Accounting, 5/E
Horngren/Harrison/Bamber
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Objective 6
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Accounting, 5/E
Horngren/Harrison/Bamber
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Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
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Business Publishing
Accounting, 5/E
0
30,000
$ 5,400
2,100
$33,300
Horngren/Harrison/Bamber
1 - 41
Liabilities
Cash
$ 20,000
Accounts payable
Accounts receivable
2,000
Owners equity,
Supplies
Land
Total assets
500
11,000
$ 33,500
Business Publishing
G. Gillen, capital
200
33,300
Accounting, 5/E
$33,500
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Accounting, 5/E
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Accounting, 5/E
Horngren/Harrison/Bamber
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End of Chapter 1
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
1 - 45