1-1 贾建军 Jia Jian Jun 贾建军 Jia Jian Jun [email protected] Accounting.

1-1

贾建军

Jia Jian Jun

贾建军

Jia Jian Jun

[email protected]

Accounting

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The Role of Accounting in Business

Chapter 1

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1. Describe the types and forms of businesses, business strategies, value chains, and stakeholders.

2. Describe the three business activities of financing, investing, and operating.

3. Define accounting and explain its role in business.4. Describe and illustrate the basic financial statements

and how they interrelate.5. Describe eight basic accounting concepts underlying

financial reporting.6. Describe and illustrate the use of horizontal analysis

to analyze and evaluate a company’s performance.

Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives

After studying this After studying this chapter, you should chapter, you should

be able to:be able to:

After studying this After studying this chapter, you should chapter, you should

be able to:be able to:

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1Learning ObjectiveLearning ObjectiveLearning ObjectiveLearning Objective

Describe the types and forms of businesses, business strategies, value chains, and stakeholders.

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ProductProduct ProductProduct

General Motors Automobiles, trucks, vansGeneral Mills Breakfast cerealsBoeing Jet aircraftNike Athletic shoesCoca-Cola BeveragesSony Stereos, televisions, radios

General Motors Automobiles, trucks, vansGeneral Mills Breakfast cerealsBoeing Jet aircraftNike Athletic shoesCoca-Cola BeveragesSony Stereos, televisions, radios

Manufacturing Business`Manufacturing Business`Manufacturing Business`Manufacturing Business`

Types of Businesses

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Merchandising BusinessMerchandising BusinessMerchandising BusinessMerchandising Business


Wal-Mart General merchandiseToys”R”Us ToysBarnes & Noble BooksBest Buy Consumer electronicsAmazon. Com Books

Types of Businesses

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Disney EntertainmentDelta Air Lines TransportationMarriott Hotels Hospitality and lodgingMerrill Lynch Financial adviceSprint Telecommunication

Disney EntertainmentDelta Air Lines TransportationMarriott Hotels Hospitality and lodgingMerrill Lynch Financial adviceSprint Telecommunication

Service BusinessService BusinessService BusinessService Business

Types of Businesses

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There are three forms of business

organizations

There are three forms of business

organizations

Proprietorship Partnership Corporation

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A proprietorship is owned by one

individual.

A proprietorship is owned by one

individual.

Advantages• Ease in organizing• Low cost of organizing

Disadvantage• Limited source of

financial resources• Unlimited liability

Doug’s

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A partnership is owned two or

more individuals.

A partnership is owned two or

more individuals.

Advantages• More financial

resources than a proprietorship.

• Additional management skills.

Disadvantage• Unlimited liability.

Doug and Max’s

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A corporation is organized under state or federal statutes as a separate legal entity.

A corporation is organized under state or federal statutes as a separate legal entity.

Advantage• The ability to obtain

large amounts of resources issuing stocks.

Disadvantage• Double taxation.

D & M Inc.

Business Stakeholders andAccounting Information Users

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STAKEHOLDERS

Internal:Stockholders ManagersEmployees

External:SuppliersCustomersStockholders

Business StakeholdersBusiness StakeholdersBusiness StakeholdersBusiness Stakeholders

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Business StakeholdersBusiness StakeholdersBusiness StakeholdersBusiness StakeholdersBusiness

StakeholdersInterest in the

Business Examples

Capital market Providers of major Banks, owners, stakeholder financing for the stockholders

business

Product or service Buyers of products Customers and market stakeholders or services and vendors suppliers

to the business

Government Collectors of taxes and Federal, state, and stakeholder fees from the business city governments

and its employeesInternal stakeholders Individuals employed Employees and

by the business managers

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Revenues

- Expenses

= Net Income

Revenues

- Expenses

= Net Income

Operating ActivitiesOperating ActivitiesOperating ActivitiesOperating Activities

= Net Loss

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Define accounting and its role in business.3

Learning ObjectiveLearning ObjectiveLearning ObjectiveLearning Objective

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What is accounting?What is accounting?What is accounting?What is accounting?

Accounting is an information system that provides reports to

stakeholders about the economic activities and condition of a business.

Accounting is an information system that provides reports to

stakeholders about the economic activities and condition of a business.

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Major objectives of Major objectives of financial accountingfinancial accountingMajor objectives of Major objectives of financial accountingfinancial accounting

1. To report the financial condition of a business at a point in time.

1. To report the financial condition of a business at a point in time.

2. To report changes in the financial condition of a business over a period of time.

2. To report changes in the financial condition of a business over a period of time.

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Describe and illustrate the basic financial statements and how they interrelate.


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Income StatementIncome StatementIncome StatementIncome Statement

An income statement is a summary of the revenue and the expenses for a specific period of time.

An income statement is a summary of the revenue and the expenses for a specific period of time.

Objective:Objective:Objective:Objective:Reports Reports

change in change in financial financial conditioncondition

Reports Reports change in change in financial financial conditioncondition

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Revenues

- Expenses

= Net Income

Revenues

- Expenses

= Net Income

Accounting EquitionAccounting Equition ：：incomestatementincomestatement

Accounting EquitionAccounting Equition ：：incomestatementincomestatement

= Net Loss

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Income StatementIncome StatementIncome StatementIncome StatementHershey Foods Corporation

Income StatementFor the Year Ended December 31, 2001

(in thousands)

Revenues:Sales $4,557,241

Expenses:Cost of sales $2,665,566Selling and administrative 1,269,964Other expenses 209,077Interest 69,093Income taxes 136,385 4,350,085

Net income $ 207,156EX 1-10

Note that the time period for the

statement is in the heading.

Note that the time period for the

statement is in the heading.

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Retained Earnings StatementRetained Earnings StatementRetained Earnings StatementRetained Earnings Statement

The retained earnings statement reports changes in

financial condition due to changes in retained earnings.

The retained earnings statement reports changes in

financial condition due to changes in retained earnings.




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Retained Earnings StatementRetained Earnings StatementRetained Earnings StatementRetained Earnings Statement

Hershey Foods CorporationRetained Earnings StatementFor the Year Ended December 31, 2001

(in thousands)

Retained earnings, January 1, 2001 $2,702,927Add net income $207,156Less dividends 154,750Increase in retained earnings 52,406Retained earnings, December 31, 2001 $2,755,333From the

income statement

From the income

statement

Again, note the time period

Again, note the time period

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Balance SheetBalance SheetBalance SheetBalance Sheet

The balance sheet reports the financial condition as

of a point in time.

The balance sheet reports the financial condition as

of a point in time.

Objective:Objective:Objective:Objective:Reports Reports financial financial conditioncondition

Reports Reports financial financial conditioncondition

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AssetsAssets = (Claims) Rights to the Assets

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AssetsAssets = LiabilitiesLiabilitiesStock-

holders’ Equity

Stock-holders’ Equity

+

The rights of creditors

The rights of the stockholders

The The Accounting Accounting EquationEquation

The The Accounting Accounting EquationEquation

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Balance SheetBalance SheetBalance SheetBalance SheetHershey Foods Corporation

Balance SheetDecember 31, 2001

(in thousands)

AssetsCash $ 134,147Accounts receivable 361,726Inventories 512,134Prepaid expenses 62,595Property, plant, and equipment 1,534,901Intangibles 429,128Other assets 212,799Total assets $3,247,430

ContinuedContinuedContinuedContinued

Note that the date is a specific point

in time

Note that the date is a specific point

in time

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LiabilitiesAccounts payable $ 133,049Accrued liabilities 462,901Notes and other debt 1,245,939Income taxes 258,337

Total liabilities $2,100,226

Stockholders’ EquityCapital stock $ 183,213Retained earnings 2,755,333Repurchased stock and other equity items (1,791,342)

Total stockholders’ equity $1,147,204Total liabilities and stockholders’ equity $3,247,430

Matches total assetsMatches total assetsMatches total assetsMatches total assets

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Statement of Cash FlowsStatement of Cash FlowsStatement of Cash FlowsStatement of Cash Flows

The statement of cash flows reports the changes in financial condition due

to the changes in cash during a period.

The statement of cash flows reports the changes in financial condition due

to the changes in cash during a period.




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Describe the three business activities of financing, investing, and operating.

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Financing ActivitiesFinancing ActivitiesFinancing ActivitiesFinancing Activities

Financing activities involve obtaining funds to begin and operate a business.

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Businesses seek financing by:borrowing

issuing shares of ownership

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A liability is a legal obligation to repay the amount borrowed according to the

terms of the borrowing agreement.

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Samples of Liabilities

• Accounts payable: When a business buys a service or product on credit.

• Bonds payable: When a business borrows money by issuing bonds.

• Interest payable: Any interest that is due on a note or a bond.

• Note payable: When a business issues commercial paper or borrows on a line of credit.

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A business may also finance its operations by issuing shares of stock. The basic type of stock

is called common stock.

A business may also finance its operations by issuing shares of stock. The basic type of stock

is called common stock.

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Investing ActivitiesInvesting ActivitiesInvesting ActivitiesInvesting Activities

Investing activities involve the selection and management of long-term resources that will be used to develop, produce, and sell goods and services.

Investing activities involve the selection and management of long-term resources that will be used to develop, produce, and sell goods and services.

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Assets are resources that the business

owns or are otherwise under its legal control and

available for use in the future.

Assets are resources that the business

owns or are otherwise under its legal control and

available for use in the future.

What are assets?What are assets?

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When the business sells merchandise or services to a

customer, the right to collect is an account receivable.

When the business sells merchandise or services to a

customer, the right to collect is an account receivable.

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Revenue is the increase in assets

from selling products or services. Revenue

is often identified according to its

source, such as Rent Revenue.

Revenue is the increase in assets

from selling products or services. Revenue

is often identified according to its

source, such as Rent Revenue.

What is revenue?What is revenue?

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An expense is a decrease in assets or

an increase in liabilities from producing and

delivering goods or providing services that constitute the primary operating activities of

an organization.

An expense is a decrease in assets or

an increase in liabilities from producing and

delivering goods or providing services that constitute the primary operating activities of

an organization.

What is an expense?EX1-7 ； EX1-8

What is an expense?EX1-7 ； EX1-8

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Statement of Cash FlowsStatement of Cash FlowsStatement of Cash FlowsStatement of Cash Flows

Three categories on the statement of cash flow are:

Three categories on the statement of cash flow are:1. Operating activities

2. Investing activities

3. Financing activities

1-43Hershey Foods Corporation

Statement of Cash FlowsFor the Year Ended December 31, 2001

(in thousands)

Net cash flows from operating activities $ 706,405Cash flows from investing activities:

Investments in property, plant, and equipment $(187,029)Proceeds from sale of property, plant, and equipment 63,042

Net cash flows used in investing activities $(123,987)Cash flows from financing activities:

Cash receipts from financing activities, including debt $ 30,589Dividends paid to stockholders (154,750)Repurchase of stock (40,322)Other, including repayment of debt (315,757)

Net cash flows used in financing activities $(480,240)Net increase in cash during 2001 $ 102,178Cash as of January 1, 2001 31,969Cash as of December 31, 2001 $ 134,147

Note the time periodNote the time period

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Financial History of Financial History of a Businessa Business


DEC. 31

2003

Balance Sheet Dec. 31, 2003

Income statement for the

year ended December 31,

2003

Next slide

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DEC. 31

2004




2004

Next slide

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DEC. 31

2005




2005

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The EndThe End

Chapter 1Chapter 1

1-1 贾建军 Jia Jian Jun 贾建军 Jia Jian Jun [email protected] Accounting.

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