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Chapter 1-Accounting in Business
Tài chính - tiền tệ (KTC_2001)
Trường Đại học Văn Lang
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CHAPTER 1
Accounting in Business
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Learning Objectives
➢ Explain the purpose and importance of accounting. ➢ Identify users and uses of, and opportunities in, accounting. ➢ Explain why ethics are crucial to accounting. ➢ Explain generally accepted accounting principles and define and apply several accounting principles. ➢ Define and interpret the accounting equation and each of its components. ➢ Analyze business transactions using the accounting equation. ➢ Identify and prepare basic financial statements and explain how they interrelate. ➢ Compute and interpret return on assets.
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Learning Objective 1
Explain the purpose and
importance of accounting.
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Importance of Accounting
Accounting is an information and
measurement system that identifies,
records, and communicates an
organization’s business activities.
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Users of Financial Information
Explain why ethics
are crucial to accounting.
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Learning Objective 3
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Ethics – A Key Concept
The goal of accounting is to provide useful information for decisions. For information to be useful, it must be trusted. This demands ethics in accounting. Ethics are beliefs that distinguish right from wrong. They are accepted standards of good and bad behavior.
Explain generally accepted
accounting principles and define
and apply several
accounting principles.
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Learning Objective 4
.
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Conceptual Framework
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Accounting Principles
Expense Recognition Principle (Matching Principle) Full Disclosure Principle Revenue Recognition Principle Measurement Principle (Cost Principle)
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Accounting Assumption
Business Entity Assumption Time Period Assumption Going-Concern Assumption Monetary Unit Assumption 16
Proprietorship, Partnership, Corporation, and
Limited Liability Company
Proprietorship Partnership Corporation
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Business Transaction and Accounting
The Accounting Equation
Expanded Accounting Equation:
Net Income
Assets = Liabilities + Equity
Analyze business transactions
using the accounting equation.
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Learning Objective 6
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Chas Taylor invests $30,000 cash to
start a business named FastFoward.
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####### Transaction 2 :
####### Purchase Supplies for Cash
Company purchased supplies by
paying $2,500 cash.
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####### Transaction 4 :
####### Purchase Supplies on Credit
Purchased supplies of $7,100 on credit.
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####### Transaction 5 :
####### Provided services and received cash
Provided consulting services to a customer and received $4,200 cash right away.
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Transactions 6 and 7 :
Payment of Expenses in Cash
Paid rent of $1,000 and salaries of $700 to employees. 28
####### Transaction 8 :
####### Provide Services and Facilities for Credit
Provided consulting services of $1,600 and rents facilities for $300 to a customer for credit.
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####### Transaction 11 :
####### Withdrawal of Cash by Owner
FastForward pays $900 as partial payment for supplies purchased in transaction 4.
Identify and prepare basic
financial statements and
explain how they interrelate.
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Learning Objective 7
.
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Financial Statements
The four financial statements and their purposes are:
- Income statement — describes a company’s revenues and expenses and computes net income or loss over a period of time.
- Statement of owner’s equity— explains changes in equity from owner investments and net income (or loss) and from any withdrawals over a period of time.
- Balance sheet — describes a company’s financial position (types and amounts of assets, liabilities, and equity) at a point in time.
- Statement of cash flows — identifies cash inflows (receipts) and cash outflows (payments) over a period of time. 34
Financial Statements
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Return on Assets
Return on assets (ROA) is stated in ratio form as net income divided by the average total assets invested. Net income Average total assets Return on assets =
End of Chapter 1
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Chapter 1-Accounting in Business
Course: Tài chính - tiền tệ (KTC_2001)
University: Trường Đại học Văn Lang
