ACCT100 - Chapter 1-1 CHAPTER 1 ACCOUNTING IN ACTION...

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Unformatted text preview: Chapter 1-1 CHAPTER 1 ACCOUNTING IN ACTION ACCT100 Autumn 2011 Teresa Chu Chapter 1-2 What is Accounting? square4 System that provides financial information square4 (1) Identify (2) record & (3) communicate economic events of an organization to interested users square4 Identify: select business-related events square4 Record: provide systematic, chronological history of financial activities square4 Communicate: analyze (use of ratios, %, graphs & charts) and interpret (highlight uses, meaning and limitations) financial statements to users Chapter 1-3 Three Activities What is Accounting? Illustration 1-1 Accounting process The accounting process includes the bookkeeping function. Chapter 1-4 Who Uses Accounting Data? square4 Internal users square4 Individuals inside a company who plan, organize and run the business square4 Require BOTH internal and external reports square4 Managerial accounting provides internal reports square4 Financial accounting provides external reports square4 External users: square4 Individuals or organizations outside a company square4 Require JUST external reports Chapter 1-5 Management Human Resources Tax authorities Labor Unions SEC Marketing Finance Investors Creditors Who Uses Accounting Data? Customers Internal Users External Users Chapter 1-6 The Building Blocks of Accounting square4 Ethics in financial reporting square4 Standards of conduct by which one’s actions are judged as right/wrong, honest/dishonest, fair/not fair square4 Generally Accepted Accounting Principles (GAAP) square4 Laws of accounting square4 US accounting standard-setting body ⇒ Financial Accounting Standards Board (FASB) square4 US agency that oversees US financial market and FASB ⇒ Securities and Exchange Commission (SEC) Chapter 1-7 Organizations Involved in Standard Setting: Securities and Exchange Commission (SEC) Financial Accounting Standards Board (FASB) International Accounting Standards Board (IASB) The Building Blocks of Accounting http://www.fasb.org/ http://www.sec.gov/ http://www.iasb.org/ Chapter 1-8 The Building Blocks of Accounting Cost Principle or Historical Cost Principle square4 Record assets at cost square4 Use COST at time of purchase AND over the time asset is held square4 Ignore increase/decrease in market value square4 Justification: Cost can be easily verified (objective) square4 Dilemma: Cost is more reliable vs. Market value is more relevant Chapter 1-9 Two Assumptions Economic Entity Assumption (WHAT???) square4 Economic entity: any organization/unit square4 Activities of the entity must be separated from activities of owners & other entities square4 ONLY record transactions of the separate entity Monetary Unit Assumption (HOW???) square4 ONLY includes transactions that can be expressed in money ($) square4 Quantify economic events Chapter 1-10 Assets Liabilities Owners’ Equity = + The Basic Accounting Equation Accounting Equation square4 Provide underlying framework for recording and summarizing economic events square4 3 Elements: (1) ASSETS (2) LIABILITIES (3) OWNER’S EQUITY Chapter...
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ACCT100 - Chapter 1-1 CHAPTER 1 ACCOUNTING IN ACTION...

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