Kế toán, kiểm toán - Chapter one: An introduction to accounting

Chapter OneAn Introduction to Accounting© 2015 McGraw-Hill Education.Role of Accounting in SocietyAccounting provides information that is useful in answering questions about resource allocation.Should I invest money in IBM or General Motors? 1-2 1-3 1-4Elements of Financial StatementsAssets—Cash, Equipment, Buildings, LandLiabilitiesEquityContributed CapitalRevenueExpensesDistributionsNet IncomeGainsLossesSubclassifications of the elements are frequently called accounts.Accounts are reported in the financial statements. 1-5Accounting EquationAssets = Liabilities + EquityAssets = ClaimsClaims on the assets are from two sources: Creditors (liabilities) Investors or owners (equity). 1-6Event 1: RCS (formed on Jan. 1, 2014) acquired cash through $120,000 common stock issue. Increase assets (cash).Increase equity (common stock).Asset Source TransactionEvent 2: RCS acquired $400,000 cash by borrowing from a creditor.Increase assets (cash).2. Increase liabilities (notes payable).Asset SourceTransaction 1-7Event 3: RCS paid $500,000 cash to purchase land.Decrease assets (cash).Decrease equity (selling expenses).Asset ExchangeTransactionEvent 4: RCS obtained $85,000 cash by leasing camp sites to customers.1. Increase assets (cash)2. Increase stockholders’ equity (revenue).Asset Source Transaction 1-8Event 5: RCS paid $50,000 cash for operating expenses.Decrease assets (cash).Decrease equity (operating expenses).Asset UseTransaction1. Decrease assets (cash).2. Decrease stockholders’ equity (retained earnings).Asset UseTransactionEvent 6: RCS paid $4,000 in cash dividends to its owners. 1-9Event 7: The land that RCS purchased for $500,000 cash had an appraised value of $525,000 on Dec. 31, 2014.Not Recognized due to Historical Cost conceptNon-TransactionHistorical Cost Concept 1-10Summary of Accounting Events 1-11Two Views of the The Right Side of the Accounting EquationSources of the company’s assets.Stewardshipmeans to protect and use assets for the benefit of the owners.Obligations of the company to return creditor assets.Commitments of the company to investor-provided assets.View TwoView One 1-12Distributions in Business LiquidationsCreditors have Priority.If there are any assets left over, they are distributed to investorsGoing ConcernAssumes that a business is able to continue operations into the foreseeable future. 1-13Recap: Types of TransactionsThe described transactions have been classified into one of three categories:Asset SourceAsset ExchangeAssetUse Increase total assets, increase total claimsIncrease one asset, decrease another assetDecrease total assets, decrease total claims 1-14Preparing Financial StatementsNet LossAccounting PeriodMatching Conceptresults when expenses exceed revenues.Revenues exceeded expenses.Income is measured for a span of time called the{Revenues are matched to expenses. 1-15Preparing Financial Statements 1-16Preparing Financial StatementsequalAssets are displayed in order of liquidity. 1-17OperatingInvestingFinancingPreparing Financial Statements 1-18The Closing ProcessTransfers net income (or loss) and dividends to Retained Earnings.Establishes zero balances in all revenue, expense, and dividend accounts. 1-19Horizontal Financial Statements Model 1-20Annual ReportsFinancial StatementsNotes Auditor’s Report –Chapter 6Management’s Discussion and Analysis (MD&A)Traditionally, large companies have distributed expensive annual reports with many color photographs. Increasingly, however, companies are issuing more modest annual reports or are simply distributing their 10-K reports. 1-21End of Chapter One 1-22