Escolar Documentos
Profissional Documentos
Cultura Documentos
John J. Wild
4th Edition
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2008
Chapter 1
Introducing Accounting
in Business
Importance of Accounting
is a
Accounting Identifies
system that
Records
information
Relevant Communicates
that is
Reliable
to help users make
Comparable better decisions.
Accounting Activities
Identifying Recording
Business Business
Activities Activities
Communicating
Business
Activities
Opportunities in Accounting
Financial Managerial Taxation
•Preparation •General accounting •Preparation
•Analysis •Cost accounting •Planning
•Auditing •Budgeting •Regulatory
•Regulatory •Internal auditing •Investigations
•Consulting •Consulting •Consulting
•Planning •Controller •Enforcement
•Criminal •Treasurer •Legal services
investigation •Strategy •Estate plans
Private
Public accounting
accounting 60%
25%
Government,
not-for-profit,
& education
15%
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2008
C4
Ethics
Beliefs that
Accepted
distinguish
standards of
right from
good and bad
wrong
behavior
Principles of Accounting
Now Future
Going-Concern Principle
Reflects assumption that the
business will continue operating
McGraw-Hill/Irwin instead of being closed or sold.
© The McGraw-Hill Companies, Inc., 2008
C5
Principles of Accounting
Characteristics of Businesses
Characteristic Proprietorship Partnership Corporation
Business entity yes yes yes
Legal entity no no yes
Limited liability no* no* yes
Unlimited life no no yes
Business taxed no no yes
One owner allowed yes no yes
Accounting Equation
Liabilities
Assets & Equity
Cash
Accounts Notes
Receivable Receivable
Resources
owned or
Vehicles controlled
by a Land
company
Store Buildings
Supplies
Equipment
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2008
A1
Liabilities
Accounts Notes
Payable Payable
Creditors’
claims on
assets
Taxes Wages
Payable Payable
Equity
Contributed Retained
Capital Earnings
Owner’s
claim on
assets
Dividends
McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2008
Expanded Accounting
A1
Equation
Common _ _
Stock
Dividends
+ Revenues Expenses
Retained Earnings
Transaction Analysis
J. Scott invests $20,000 cash to start
the business in exchange for stock.
Transaction Analysis
J. Scott invests $20,000 cash to start the
business in return for stock.
Transaction Analysis
Transaction Analysis
Transaction Analysis
Transaction Analysis
Transaction Analysis
Transaction Analysis
Transaction Analysis
The balances so far appear below. Note that the
Balance Sheet Equation is still in balance.
Transaction Analysis
Transaction Analysis
Transaction Analysis
Provided consulting services receiving
$3,000 cash.
Transaction Analysis
Transaction Analysis
Transaction Analysis
Transaction Analysis
Dividends of $500 are paid to shareholders.
Financial Statements
Let’s prepare the Financial Statements
reflecting the transactions we have
recorded.
1. Income Statement
2. Statement of Retained Earnings
3. Balance Sheet
4. Statement of Cash Flows
Income Statement
Balance Sheet
ROA is viewed as an
indicator of operating
efficiency.