chapter 1 t.haya alajaji business decisions business decisions and financial accounting
TRANSCRIPT
CHAPTER 1
T.Haya Alajaji
BUSINESS DECISIONS And FINANCIAL ACCOUNTING ..
1. ACCOUNTING FOR BUSINESS DECISIONS
2. Users of accounting.
3. Generally Accepted Accounting Principles (GAAP).
4. THE BASIC ACCOUNTING EQUATION
5. FINANCIAL STATEMENTS
Objectives:
Objectives
user of accounting
Accounting
Financial Statement
4 Bisic Accounting equationA= L + OE
Form of Business
3
GAAP
kinds of Reports
ACCOUNTING FOR BUSINESS DECISIONS
Accounting (المحاسبة): A system of
(analyze, record, and summarize) the results of a
business’s activities and then reporting the results
to decision makers.
Users of accounting can be divided
into two groups: ( المستخدمون
(للمحاسبة
Internal Users
external users
This information can be presented in two kinds of
reports.
Managerial accounting reports. ( التق5ارير المحاس5بية
(اإلدارية
Include detailed financial plans and continually updated
reports about the operating performance of the
company. These reports are made available only to the
company’s employees (internal users).
1-
Financial accounting reports, called financial statements. (التقارير المالية)2-
Which are prepared periodically to provide information
to people not employed by the business. These
external financial statement users aren’t given
access to detailed internal records of the company.
Creditors and investors are the two primary external
user.
Generally Accepted Accounting Principles
GAAP
( عليها المتعارف المحاسبية ( المبادئ
accounting concept Principles ) المبادئ) 1 -cost
2 -Revenues recognition 3 -Matching
4 -Full Disclosure
Assumptions ) الفروض) 1 -unit of measure
2 -separate Entity 3 -Going Concern
4 -time period
Some of Accounting Concepts GAAP
Assets (األصول) •Assets are resources owned by the business.
1 -Cash 2 -Account
receivable 3 -Note Receivable
4 -Inventory
Cash and other resources that are expected to turn to cash or to be used up within one year of the balance sheet date
1- Current Assets
Type of assets
1- Land.2-Buildings.3-Cars4- Equipment.
A long-term, tangible asset held for business use and not expected to be converted to cash in the current fiscal year
2- Fixes Assets
3- Intangible Assets
LandLand
EquipmentEquipment
BuildingsBuildings
CashCash
Store SuppliesStore
Supplies
Notes Receivable
Notes Receivable
Accounts ReceivableAccounts
Receivable
Resources owned or
controlled by a company
Resources owned or
controlled by a company
AssetsA1
1-14
Liabilities ( االلتزامات – ( الخصوم•The rights of creditors .
Type of Liabilities
1- Long-Term Liabilities Bonds and Long-Term Loans.
2- Short-Term Liabilities
Accounts Payable = is liability created by a purchase on account.
Notes Payable
Accrued Expenses = is expense which has been incurred but not yet paid.
Unearned Revenues. = the customer pays in advance for services that have not
yet been performed by the recipient of the payment
• Liability accounts will normally have credit balances
owner’s Equity ( حقوق. It is the right of the owners •( الملكية
1. Capital .
2. Drawing : account represents the amount of withdrawals
made by the owner.
3. Net Income (Revenues – Expenses)
Owner's equity accounts will normally have credit
balances.
THE BASIC ACCOUNTING EQUATION
Assets=Liabilities + Owner’s Equity
Credit Accounts
If Credit, and if Debit
Debit Accounts
If Debit, and if Credit
AssetsLiabilities +
Equity
Accounting Equation
LiabilitiesLiabilities EquityEquityAssetsAssets = +
A1
1-18
FINANCIAL STATEMENTS
Order Prepare
d
Financial Statemen
t
Description of Statements
1 Income Statement
A summary of the revenue and expenses for a specific period of time, such as a month or a year.
2 Statement of Owner's
Equity
A summary of the changes in the owner's equity that have occurred during a specific period of time, such as a
month or a year.
3 Balance Sheet
A list of the assets, liabilities, and owner's equity as of a specific date, usually at the close of the last day of a
month or a year.
4 Statement of Cash
flows
A summary of cash receipts and cash payments for a specific period of time, such as a month or a year.
NetSolutionsIncome statement
For the Month Ended November 30, 2011
Fees earned.………………………………………………………………………………
$7,500
Expenses:
Wages expense.……………………………………………………………………
$2,125
Rent expense..………………………………………………………………………
800
Supplies expense.…………………………………………………………………
800
Utilities expense.…………………………………………………………………
450
Miscellaneous expense…………………………………………………………
275
Total expense..………………………………………………………………
4,450
Net Income..………………………………………………………………………………
$3,050
NetSolutionsStatement of Owner’s Equity
For the Month Ended November 30, 2011
Chris Clark, Capital, November 1, 2011 .………………………………
$0
Investment on November 1, 2011 .…………………………………………
$25,000
Net income for November.……………………………….……………………
3,050
$28,050
Less withdrawals.……………………………… .……………………………………
2,000
Increase in owner’s equity.……………………………… ……………………
26,050
Chris Clark, Capital, November 30, 2011 ……………………………
$26,050
NetSolutionsBalance Sheet
November 30, 2011
Assets Liabilities
Cash ………………………………
$5,900 Account payable ……………………………………
$400
Supplies ..………………………
550 Owner’s Equity
Land ………………………………
20,000 Chris Clark, capital ………………………………
26,050
Total assets ..………………
$26,050 Total liabilities and owner’s equity..… 26,050$
Self-Study PracticeIn the space provided, indicate: (1) the type of account (A = asset, L = liability, OE = ownership equity, R = revenue, E = expense), and (2) whether it is reported on the income statement (I/S), statement of cash flows (SCF), or balance sheet (B/S). Account Title Type
Statement1. Land 2. Wages Expense3. Accounts
Receivable4. Rent Revenue5. Contributed
Capital6. Note Payable
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