Lecture_13_-_Review - Review Session Part 1 Chapter 1 ~ 9...

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Unformatted text preview: Review Session Part 1 Chapter 1 ~ 9 Lecture 13 1 What’s Accounting? What’s Accounting? Accounting is a system for providing quantitative, financial information about economic entities that is useful for making sound economic decisions Accounting is a system for providing quantitative, financial information about economic entities that is useful for making sound economic decisions 2 How does this system work? How does this system work? Capital Investment Purchase Inventory Sell Products Pay Dividends + Business Transactions Supplies Expense Prepaid Expense/ Unearned Revenue Uncollectible Accounts Expense Year-end Adjustments = Balance Sheet Assets: Current Assets Long-term Assets Liabilities: Current Liabilities Long-term Liabilities Shareholders’ Equity: Common Stock Additional Paid-in Capital Retained Earnings Income Statement Revenue Cost of Goods Sold Gross Profit Operating Expenses Income Taxes Expense Net Income Final Products Depreciation Expense 3 Basic Concepts Basic Concepts • Definitions of assets, liabilities, owners’ equity, revenue and expenses • Classifications of various accounts (e.g. assets, liabilities, owners’ equity, revenue and expenses) • Double entry system to record business transactions • Accrual accounting in lieu of cash accounting • Accounting equations: • Assets = Liabilities + Owners’ equity • Revenue – Expenses = Net income • Beg. R/E + N/I – Dividends = End. R/E 4 Basic Concepts Basic Concepts Principles • Cost principle • Revenue recognition principle • Matching principle Constraints • Conservatism • Materiality Principles • Cost principle • Revenue recognition principle • Matching principle Constraints • Conservatism • Materiality 5 6 Assets Liabilities: Current Assets: Current Liabilities: Cash $ ### Accounts Payable $ ### Accounts Receivable (gross) ### Tax Payable ###- Allowance for doubtful accounts- ### Salary payable ### Accounts Receivable (net) ### Short-term Investments ### Inventory ### Long-term Liabilities: Notes Payable ### Total Current Assets $### Total Liabilities $### Noncurrent Assets Owners' Equity Property, Plant and Equipment (gross) ### Common Stock $###- Accumulated depreciation- ### Property, Plant and Equipment (net) ### Goodwill ### Retained Earnings ### Total Noncurrent Assets $### Total Owners' Equity $### Total Assets $### Total Liabilities and Owners' Equity $### NUS Company Balance Sheet At December 31, 2007 7 Valuation of Financial Assets Valuation of Financial Assets Type of Financial Assets Basis for Valuation Cash (and cash equivalents) Face amount Short-term investments (marketable securities) Current market value Accounts Receivable Net realizable value Estimated collectible amount Estimated collectible amount 8 How to Account for Doubtful Accounts?...
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This note was uploaded on 12/23/2009 for the course BIZAD FNA1002X taught by Professor Edmundkeung during the Fall '09 term at National University of Singapore.

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Lecture_13_-_Review - Review Session Part 1 Chapter 1 ~ 9...

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