1. NGUYEN THI KIM Date: Saturday, 15 September FINANCIAL ACCOUNTING Chapter 1 INTRODUCTION TO ACCOUNTING AND BUSINESS

2. CONTENT 1. Business & Accounting 2. Accounting equation, elements of the equation 3. Business transactions change basic elements of accounting equation 4. Financial statements of a proprietorship and the interrelate

3. Nature of a business  Definition detail detail  Types of business detail detail  Types of business organizations detail detail  Business strategies detail detail

4. Nature of a business  Business is  an organization  basic resources (input) are assembled and processed  provide goods or services (output) to customers

5. TYPES OF BUSINESS  Manufacturing businesses  basic inputs →products → sell to individual customers  Merchandising businesses  purchase products → sell to customers  Service businesses  provide services to customers.

6. TYPES OF BUSINESS ORGANIZATIONS  A Proprietorship  owned by one individual  A partnership  owned by 2 or more individuals  A Corporation  organized under state or federal statutes  a separate legal taxable entity.  A limited liability corporation  combines partnership and corporate  organized as a corporation,  taxed as a partnership

7. BUSINESS STRATEGIES Business strategy Business strategy – integrated set of plans and actions – to gain an advantage over competitors Low cost strategy Low cost strategy – products/services of acceptable quality at a lower cost Differentiation strategy Differentiation strategy – products/services with unique characteristics – At premium price.

8. BUSINESS STAKEHOLDERS A Business stakeholder A Business stakeholder – person or entity having interest in the economic performance of the business. Accounting, an information system Accounting, an information system – provides reports to stakeholders – about economic activities and condition of a business

9. Business ethics Moral principles Moral principles – guide the conduct of individuals →ethics. Proper ethical conduct Proper ethical conduct – not only consider your best interest – but also best interest of others

10. Profession of accounting Accountant →business firm, not-for- profit organization Accountant →business firm, not-for- profit organization – private accounting Accountant provide services on a fee basis Accountant provide services on a fee basis – public accounting

11. Profession of accounting (Cont.) Private accounting Management accountant,Management accountant, Industrial/cost accountant,Industrial/cost accountant, Chief/controller,Chief/controller, Certified management accountant (CMA)Certified management accountant (CMA) Public accounting Certified Public Accountant (CPAs)

12. Specialized accounting fields Financial accounting: Financial accounting: – Recording, Reporting economic data and activities for a business. Managerial/management accounting: Managerial/management accounting: – Uses financial accounting, estimated data – Management day-to-day operations – Planning future operations.

13. Generally accepted accounting principles GAAP GAAP – followed by financial accountants – reports able to compare between companies Financial Accounting Standards Boards (FASB) Financial Accounting Standards Boards (FASB) – authoritative body primary responsibility for developing accounting principles.

14. Business entity concept Business activities are recorded separately Business activities are recorded separately from the activities of the stakeholders Cost concept Cost concept – basis for entering the exchange price Objectivity concept Objectivity concept – accounting records and reports based on objective evidence. Unit of measure concept Unit of measure concept – economic data recorded in dollars. – Money is common unit measurement

15. Business transactions and the accounting equation Business transaction: Business transaction: – economic event/condition – changes entity’s financial condition – directly affects its results of operations example example example

16. Business transactions and the accounting equation Example: Example: 1. Chris Clark deposits $25,000 in a bank account in the name of Net Solutions. CashChris Clark, Capital 25,000

17. Business transactions and the accounting equation 2. Purchase a piece of land by paying cash of $20,000 25,000 Capital Cash + Land - 20,000 20,000

18. Business transactions and the accounting equation 1,350 A/Payable supplies 1,350 3. Use credit card to buy clothing or merchandise of $1,350

19. Business transactions and the accounting equation 7,500 earning cash 7,500 4. Earned money by painting houses & received cash of $7,500

20. Business transactions and the accounting equation - 3,650 expenses cash - 3,650 5. Use resources to paint house above: wages $2,125; rent $800; utilities $450; miscellaneous exp $275

21. Business transactions and the accounting equation - 600 liabilities cash - 600 6. Use bank account to pay monthly credit card bill $600

22. Business transactions and the accounting equation - 800 Supplies expense supply - 800 7. At the end of month, cost of supplies on hand is $550

23. Business transactions and the accounting equation - 2,000 withdrawal cash - 2,000 8. Chris Clark withdraw $2,000 in cash for personal use

24. Financial statements Income statement: Income statement: – a summary of revenue and expenses – for a specific period of time Statement of owner’s equity: Statement of owner’s equity: – A summary of the changes in the owner’s equity – occurred during a specific period of time Balance sheet: Balance sheet: – a list of the assets, liabilities, and owner’s equity – as of a specific date, Statement of cash flows: Statement of cash flows: – a summary of the cash receipts and cash payments – for a specific period of time, such as a month or a year

25. $1,000 Supplies $350 $900 $100 Salary $550

26. $20,000 $5,000 $100 $200 $4,900 $24,900

28. assignments Exercise 3,4,7,12,13 Exercise 3,4,7,12,13 Problem 1A, 2A, 5A Problem 1A, 2A, 5A

29. assignments Exercise 3: business ethics Exercise 3: business ethics Write your own opinion Write your own opinion

30. assignments Exercise 4: Exercise 4: 1B, 1B, 2B, 2B, 3E, 3E, 4F, 4F, 5B, 5B, 6F, 6F, 7X, 7X, 8E, 8E, 9X, 9X, 10B 10B

31. assignments Exercise 7: Apply accounting equation to find solution Exercise 7: Apply accounting equation to find solution ? ? ?

32. assignments Exercise 12: Exercise 12: 1. inc; 1. inc; 2.dec; 2.dec; 3. inc.; 3. inc.; 4. dec 4. dec

33. assignments Exercise 13: Exercise 13: 1 c, 1 c, 2c, 2c, 3 d, 3 d, 4 c; 4 c; 5 e; 5 e; 6a;6a; 7 e;7 e; 8 a;8 a; 9e;9e; 10e10e

34. Problem 1A a. Opened a business bank account with a deposit of $18,000 from personal funds

41. Determine amount of capital Items Asset ($) Resources ($) Cash8,600 Accounts receivables 9,500 Supplies1,875 Land15,000 Accounts payable 4,100 Capital

42. Problem 5A a. Paid rent for the month, $4,000