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1、1,Accounting and theBusiness Environment,Chapter 1,2,Types of Business Organizations,P A business is owned by a single individual.P A business is owned by two or more owners.C A business is owned by stockholders.,3,Types of Business Organizations,Proprietorships A business is owned by a single indiv
2、idual.Partnerships A business is owned by two or more owners.Corporations A business is owned by stockholders.,4,Corporations,What are some advantages?separate l existencel l of stockholderstransferability of ownership relatively easyWhat are some disadvantages?t possible d taxatione governmental re
3、gulation,5,Corporations,What are some advantages?separate legal existencelimited liability of stockholderstransferability of ownership relatively easyWhat are some disadvantages?taxes possible double taxationextensive governmental regulation,6,*Proprietorships and partnerships that are set up as LLC
4、s provide limited liability.,Characteristics of Businesses,7,*Proprietorships and partnerships that are set up as LLCs provide limited liability.,Characteristics of Businesses,8,GAAP,Generally Accepted Accounting PrinciplesAccounting g that govern how accountants measure,process,and communicate fina
5、ncial informationFormulated by F A Standards B(FASB)Issues S of F Accounting S,SFAS and Interpretations.,9,GAAP,Generally Accepted Accounting PrinciplesAccounting guidelines that govern how accountants measure,process,and communicate financial informationFormulated by Financial Accounting Standards
6、Board(FASB)Issues Statements of Financial Accounting Standards,SFAS and Interpretations.,10,Entity Concept,Accounting Entity organization that stands apart as a s e unit,11,Entity Concept,Accounting Entity organization that stands apart as a separate economic unit,12,Information mustbe reasonablya.,
7、Information mustbe f from bias.,Information must report what actually h.,Individuals would arrive at s conclusions using s data.,The Reliability(Objectivity)Principle,Accounting information is based on the most r data available,13,Information mustbe reasonablyaccurate.,Information mustbe free from b
8、ias.,Information must report what actually happened.,Individuals would arrive at similar conclusions using same data.,The Reliability(Objectivity)Principle,Accounting information is based on the most reliable data available,14,Assets and servicesa should be recordedat their a c(h c).,The Cost Princi
9、ple,15,Assets and servicesacquired should be recordedat their actual cost(historical cost).,The Cost Principle,16,Assumes that the e will remain in o for the f future,The Going Concern Concept,17,Assumes that the entity will remain in operation for the foreseeable future,The Going Concern Concept,18
10、,Stable-Monetary-Unit Concept,Assumes that the dollars p p is stable,19,Stable-Monetary-Unit Concept,Assumes that the dollars purchasing power is stable,20,A corporation with 2 stockholders goes bankrupt owing$10,000.How much does each stockholder owe the creditors?,Answer:$0.The stockholders of a c
11、orporation have limited liability,which means that stockholders are not responsible for the debts of the corporation.,21,A company purchases land for$10,000.An appraiser values the land at$12,000,and the county assesses the value at$9,000 for tax purposes.At which amount should the company record th
12、e land?A.$9,000B.$10,000C.$12,000D.The company may choose any of the three values.,21,22,A company purchases land for$10,000.An appraiser values the land at$12,000,and the county assesses the value at$9,000 for tax purposes.At which amount should the company record the land?A.$9,000B.$10,000C.$12,00
13、0D.The company may choose any of the three values.,22,23,Lisa Smith owns a consulting business.Her personal residence is listed on the company financial statements.Which accounting principle does this violate?A.CostB.Going concernC.ReliabilityD.Entity,23,24,Lisa Smith owns a consulting business.Her
14、personal residence is listed on the company financial statements.Which accounting principle does this violate?A.CostB.Going concernC.ReliabilityD.Entity,24,25,Objective 3,Use the accounting equation,26,EconomicResources,Claims toEconomicResources,The Accounting Equation,Assets,=,Liabilities+Owners E
15、quity,27,Assets,Economic resources,expected to benefit the business in the futureCashAccounts receivableMerchandise inventoryFurnitureLand,28,Claims to the Assets,Liabilities economic obligations payable to an individual or organization outside the businessAccounts payableNotes payableSalary payable
16、,29,Liability,What is a liability?It is something a company owes.moneyservice legal retainersproduct magazines,30,Claims to the Assets,Owners Equity(capital)claim of business owner to the assets of the business It is whats left of the assets after liabilities have been deducted.the same as net asset
17、sthe owners claim on the entitys assets,31,EconomicResources,Claims toEconomicResources,The Accounting Equation,Assets,=,Liabilities+Owners Equity,32,Exercise 1-18,$81,000,32,000,21,000,$72,000,33,Transactions that AffectOwners Equity,OWNERS EQUITYINCREASES,OWNERS EQUITYDECREASES,Owner Investments,R
18、evenues,Expenses,Owner Withdrawals,Owners Equity,34,Investments,are the assets the owner puts in the business,35,are withdrawals of cash or other assets by the owner for personal usedecrease owners equity,Drawings,36,Revenues,Amounts earned by delivering goods or services to customersSales revenueSe
19、rvice revenueInterest revenueDividend revenue,37,Expenses,Decrease in owners equity that occurs from using assets or increasing liabilities in the course of delivering goods or services to customersSalary expenseRent expenseUtilities expenseInterest expense,38,One item is omitted in each of the foll
20、owing summaries of balance sheet and income statement data for three different sole proprietorships,X,Y,and Z.Determine the amounts of the missing items,identifying each proprietorship by letter.Proprietorship X Y ZBeginning of the Year:Assets$400,000$150,000$199,000Liabilities 250,000 105,000 168,0
21、00End of the Year:Assets 450,000 195,000 195,000Liabilities 280,000 95,000 169,000During the Year:Additional Investment by the owner?79,000 80,000Withdrawals by the owner 90,000 83,000?Revenue 195,000?187,000Expenses 170,000 113,000 185,000,39,Objective 4,Analyze business transactions,40,Transaction
22、,An event that affects the financial position of a particular entity and can be recorded reliably,41,Exercise 1-17,Increased assets(cash)No effect on total assets Decreased assets(cash)Increased assets(equipment),42,Exercise 1-17,Increased assets(accounts receivable)Decreased assets(cash)No effect o
23、n total assets Increased assets(cash),43,Exercise 1-22,Assets=$45,000,Liabilities&Owners Equity=$45,000,44,Exercise 1-22,35,000,Assets=$45,000,Liabilities&Owners Equity=$45,000,45,Exercise 1-22,2,000,Assets=$47,000,Liabilities&Owners Equity=$47,000,46,Exercise 1-22,Assets=$54,000,Liabilities&Owners
24、Equity=$54,000,47,Exercise 1-22,Assets=$51,000,Liabilities&Owners Equity=$51,000,48,Exercise 1-22,Assets=$51,000,Liabilities&Owners Equity=$51,000,-500,49,Exercise 1-22,Assets=$49,500,Liabilities&Owners Equity=$49,500,-1,500,50,Objective 5,Prepare financial statements,Evaluate business performance,O
25、bjective 6,51,Financial Statements,Income statementStatement of owners equityBalance sheetStatement of cash flows,52,Income Statement,Summary of an entitys revenues,expenses,and net income or net loss for a specific periodRevenues-ExpensesNet Income:Revenues ExpensesNet Loss:Expenses Revenues,53,Sta
26、tement of Owners Equity,Summary of changes in an entitys owners equity during a specific periodBeginning owners equity+Owners investments+Net income-Net loss-Owners withdrawalsEnding owners equity,54,Balance Sheet,Reports the entitys assets,liabilities,and owners equity as of a specific dateAssets=L
27、iabilities+Owners Equity,55,Statement of Cash Flows,Reports cash receipts and cash payments during a period(covered in Chapter 17),56,Maria Lange,M.D.Income StatementFor the Month Ended July 31,2006,Revenue:Fees earned$7,000Expenses:Salary expense$1,700Rent expense1,000Utilities expense300Total Expe
28、nses3,000 Net income$4,000,57,Maria Lange,capital,July 1,2006$0Add:Investment by owner45,000Net income for the month4,000Subtotal$49,000 Less:Withdrawals by owner 0Maria Lange,capital,July 31,2006$49,000,Maria Lange,M.D.Statement of Owners EquityFor the Month Ended July 31,2006,58,Maria Lange,M.D.Ba
29、lance SheetJuly 31,2006,AssetsCash$13,000Medical supplies1,500Land 35,000Total assets$49,500,LiabilitiesAccounts payable$500Owners equity,M.Lange,capital 49,000Total liabilities and owners equity$49,500,59,Cash$2,000Accounts receivable6,000Supplies500Equipment15,500 Total Assets$24,000,Allen Samuel
30、Road ServiceBalance SheetNovember 30,2009,Liabilities,Accounts payable$3,500Note payable5,000 Total liabilities$8,500Owners EquityA.Samuel,capital15,500 Total liabilities and owners equity$24,000,Assets,Exercise 1-24,60,Exercise 1-26,Ciliotta Design StudioIncome StatementYear Ended December 31,2006,
31、Service revenue$158,100Expenses:Salary expense$60,000 Rent expense24,000 Utilities expense6,800 Supplies expense4,000 Property tax expense1,200 Total expenses96,000Net income$62,100,61,Exercise 1-26,Owners withdrawals:Ciliottas,capital,beginning of year$0 Add:Net income62,100 Investment by owner15,000Subtotal$77,100 Less:Owner withdrawal?Ciliotta,capital,end of year$27,100,50,000,62,End of Chapter 1,
