1. Robert Libby Patricia A. Libby Daniel G. Short
FINANCIAL ACCOUNTING
Robert Libby
Patricia A. Libby
Daniel G. Short

2. Financial Accounting Course Outline Accounting Misconceptions
Introduction to Chapter 1 – Financial Statements

3. Course Objectives Understand accounting process
Prepare basic financial statements
Perform financial statement analysis

4. Keys to Successful learning in Accounting
Prepare for class by reading text prior to the lecture (spend 30 to 40 minutes)
Participate in lectures and discussion section (don’t be afraid to ask questions)
Practice by completing homework assignments
Meet GSIs and Instructors during office hours

5. Term Project You will be assigned to a group of 6 to 8 Students
You will evaluate 2-3 companies (one assigned and two decided by the group)
Your team will compare and contrast financial performance and make an investment recommendation

6. Discussion Section
Homework will be due by the end of Discussion Section—no exceptions.
You will be able to work on homework during discussion
GSIs will encourage you to participate in discussion section and will assist your team with term projects
BTW--NO DISCUSSION Section this Friday

7. EXAMS
Questions will be m/c, true false, matching and short problems/essay.
Completed exams must be turned in with the scan-tron.
Sessions 1 and 2 will not have identical exams so you must attend your sessions exam.
No Books, No Calculators and No Bathroom Breaks

8. Exams (continued) Study in teams
Do not memorize– there will be very few memorization questions.
Understand concepts and be able to solve problems.
There may be more than one right answer—Pick the BEST answer.

9. GRADING Will be based on a total of 1000 points:
Midterms (best 2of3) 400
Final Exam 300
Discussion/Homework 100
Term Project 200
Total ,000

10. Grading (continued) Grades will not be given until the end of class
Grades will be based on a curve based on total points
It will be hard to get an A as approximately 25% of the class will receive an A or A-

11. Brief History of Accounting
Accounting records go back to the Babylonian Empire (4500 B.C.)
Fra Luca Pacioli (born 1445) is considered the “Father of accounting” as he was the first to document the double entry accounting used by the Venetian's during the Italian Renaissance
Today’s accounting systems can be purchased for as little as $100 and some large companies spent over a $100Million to update systems to be Y2K compliant.

12. Common Misconceptions
Some people believe that financial statements report the market value of the company.
Financial statements
really report the cost of assets,
liabilities and
stockholders’ equity.

13. Are all transactions subject to precise and objective measurement?
Some Misconceptions
Are all transactions subject to
precise and objective measurement?
NO !
Almost all accounting numbers are influenced by estimates

14. Misconception Don’t confuse bookkeeping with accounting.
Bookkeeping involves the routine, clerical part of accounting and requires only minimal knowledge of accounting, but . . .
An accountant is a trained
professional who can design
information systems, analyze
complex transactions, and
interpret financial data.

15. Generally Accepted Accounting Principles (GAAP)
Securities Act of 1933
Securities and Exchange Act of 1934
The Securities and Exchange Commission (SEC)
has been given broad powers to determine
measurement rules for
financial statements.

16. Generally Accepted Accounting Principles (GAAP)
The SEC has worked closely with the
accounting profession to
work out the detailed rules that have
become known as GAAP.
Currently, the Financial Accounting
Standards Board (FASB) is recognized
as the body to formulate GAAP.

17. Generally Accepted Accounting Principles (GAAP)
Companies are interested in
GAAP because methods of
reporting can have the following
economic consequences . . .
Affect the selling price of stock.
Affect the amount of bonuses received by managers and other employees.
Cause a loss of competitive advantage.

18. Management Responsibility and the Demand for Auditing
To ensure the accuracy of the company’s
records management:
Maintains a system of controls.
Hires an outside independent auditor.
Board of directors review these two safeguards.

19. Independent Auditors
Overall, I believe
these financial
statements are
fair.
Auditors express an opinion as to the fairness of the financial statement presentation.
Independent auditors have responsibilities that extend to the general public.

20. Independent Auditors An audit involves . . .
Examining the financial reports to ensure compliance with GAAP.
Examining the underlying transactions incorporated into the financial statements.
Expressing an opinion as to the fairness of presentation of financial information.

21. Ethics, Reputation, and Legal Liability
The American Institute of Certified Public Accountants requires that all members adhere to a professional code of ethics.

22. Ethics, Reputation, and Legal Liability
A CPA’s reputation for honesty and competence is his/her most important asset.
Like physicians, CPAs have
liability for malpractice.

23. End of Lecture 1