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Chapter 1
Accounting in Action
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What is Accounting?
(2) organization to
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1-5 SO 1 Explain what accounting is.
What is Accounting?
Illustration 1-1
The activities of the
Three Activities accounting process
Slide
1-6 SO 1 Explain what accounting is.
What is Accounting?
Creditors
Marketing Regulatory
Agencies
Investors
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1-7 SO 2 Identify the users and uses of accounting.
What is Accounting?
Common Questions Asked User
1. Can we afford to give our
employees a pay raise? Human Resources
2. Did the company earn a
satisfactory income? Investors
3. Should any product lines be
eliminated? Management
4. Is cash sufficient to pay
dividends to shareholders? Finance
5. What price for our product will
maximize net income? Marketing
6. Will the company be able to
pay its debts? Creditors
Slide
1-8 SO 2 Identify the users and uses of accounting.
The Building Blocks of Accounting
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1-9 SO 3 Understand why ethics is a fundamental business concept.
The Building Blocks of Accounting
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1-10 SO 3 Understand why ethics is a fundamental business concept.
The Building Blocks of Accounting
Review Question
Ethics are the standards of conduct by which one's
actions are judged as:
a. right or wrong.
b. honest or dishonest.
c. fair or not fair.
d. all of these options.
Solution on
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1-11 notes page SO 3 Understand why ethics is a fundamental business concept.
The Building Blocks of Accounting
Accounting Standards
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1-12 SO 4 Explain accounting standards and the measurement principles.
The Building Blocks of Accounting
Measurement Principles
Cost Principle (Historical) dictates that companies record
assets at their cost.
Issues:
Reported at cost when purchased and also over the time the
asset is held.
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1-13 SO 4 Explain accounting standards and the measurement principles.
The Building Blocks of Accounting
Measurement Principles
Fair Value Principle indicates that assets and liabilities should
be reported at fair value.
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1-14 SO 4 Explain accounting standards and the measurement principles.
The Building Blocks of Accounting
Assumptions
Monetary Unit Assumption include in the accounting records
only transaction data that can be expressed in terms of money.
Proprietorship.
Forms of Business
Partnership. Ownership
Corporation.
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1-15 SO 5 Explain the monetary unit assumption and the economic entity assumption.
The Building Blocks of Accounting
Review Question
Combining the activities of Kellogg and General Mills
would violate the
a. cost principle.
b. economic entity assumption.
c. monetary unit assumption.
d. ethics principle.
Review Question
A business organized as a separate legal entity under
state law having ownership divided into shares is a
a. proprietorship.
b. partnership.
c. corporation.
d. sole proprietorship.
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1-22 SO 6 State the accounting equation, and define its components.
The Basic Accounting Equation
Assets
Resources a business owns.
Provide future services or benefits.
Cash, Inventory, Equipment, etc.
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1-23 SO 6 State the accounting equation, and define its components.
The Basic Accounting Equation
Liabilities
Claims against assets (debts and obligations).
Creditors - party to whom money is owed.
Accounts payable, Notes payable, etc.
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1-24 SO 6 State the accounting equation, and define its components.
The Basic Accounting Equation
Equity
Ownership claim on total assets.
Referred to as residual equity.
Share capital and retained earnings.
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1-25 SO 6 State the accounting equation, and define its components.
The Basic Accounting Equation
Illustration 1-7
Revenues result from business activities entered into for the purpose
of earning income.
Generally results from selling merchandise, performing services,
renting property, and lending money.
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1-26 SO 6 State the accounting equation, and define its components.
The Basic Accounting Equation
Illustration 1-7
Slide
1-27 SO 6 State the accounting equation, and define its components.
The Basic Accounting Equation
Illustration 1-7
Slide
1-28 SO 6 State the accounting equation, and define its components.
The Basic Accounting Equation
Slide Solution on
1-29 notes page SO 6 State the accounting equation, and define its components.
Using The Accounting Equation
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1-30 SO 7 Analyze the effects of business transactions on the accounting equation.
Using The Accounting Equation
Record/
Dont Record
Slide
1-31 SO 7 Analyze the effects of business transactions on the accounting equation.
Using The Accounting Equation
Transaction Analysis
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1-32 SO 7 Analyze the effects of business transactions on the accounting equation.
Transactions Analysis
Slide
1-43 SO 7 Analyze the effects of business transactions on the accounting equation.
Financial Statements
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1-44 SO 8 Understand the four financial statements and how they are prepared.
Financial Statements
Review Question
Net income will result during a time period when:
a. assets exceed liabilities.
b. assets exceed revenues.
c. expenses exceed revenues.
d. revenues exceed expenses.
Solution on
notes page
Slide
1-45 SO 8 Understand the four financial statements and how they are prepared.
Financial Statements Income Statement
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1-46 SO 8 Understand the four financial statements and how they are prepared.
Net income is needed to determine the
Financial Statements ending balance in retained earnings.
Illustration 1-11
Financial statements and
their interrelationships
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1-47 SO 8
Retained Earnings
Financial Statements Statement
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1-48 SO 8 Understand the four financial statements and how they are prepared.
Financial
Statements
The ending
balance in
retained
earnings is
needed in
preparing the
statement of
financial position
Illustration 1-11
Financial statements and
their interrelationships
Slide
1-49 SO 8 Understand the four financial statements and how they are prepared.
Financial Statements Balance Sheet
Illustration 1-11
Financial statements and
their interrelationships
Slide
1-50 SO 8 Understand the four financial statements and how they are prepared.
Financial
Statements
Illustration 1-11
Financial statements and
their interrelationships
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1-51
Financial Statements
Slide
1-52 SO 8 Understand the four financial statements and how they are prepared.
Financial Statements Statement of Cash Flows
Illustration 1-11
Financial statements and
their interrelationships
Slide
1-53 SO 8 Understand the four financial statements and how they are prepared.
Answer on
notes page
Slide
1-54 SO 8 Understand the four financial statements and how they are prepared.
Financial Statements
Review Question
Which of the following financial statements is prepared
as of a specific date?
a. Balance sheet.
b. Income statement.
c. Retained earnings statement.
d. Statement of cash flows.
Solution on
notes page.
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1-55 SO 8 Understand the four financial statements and how they are prepared.
Understanding U.S. GAAP
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1-56
Understanding U.S. GAAP
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Understanding U.S. GAAP
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Understanding U.S. GAAP
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Career Opportunities APPENDIX
Show me
the Money
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1-60 SO 9 Explain the career opportunities in accounting.
Copyright
Copyright 2011 John Wiley & Sons, Inc. All rights reserved.
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