Download asset

Principles of Accounting
Syllabus--Read
contract.
this carefully. It is a
Professor Daly’s class materials
Syllabus,
lecture notes,etc. posted
on Graduate School of Business
Bulletin Board
 http://graduatebusiness.sejong.ac.kr/Eng/
Classroom Conduct
Class

starts promptly at:
9:00 on Tuesday and Thursday
Classroom Conduct
You
are expected to prepare for class:
 Read
the chapter in textbook
 Write answers to assigned
questions, exercises and
problems.
Classroom Conduct
Bring
your textbook and a calculator to
class.
No computer use during class.
Show
respect for me and your
classmates by turning off your cell
phone prior to class.
Required text:
Principles of Accounting
19th edition, John J. Wild, Ken W. Shaw,
Barbara Chiappetta
Online Learning Center
 See
page viii for list of features for each chapter
of the text: Power Point lectures, quizzes, videos,
etc.
 www.mhhe.com/wildFAP19e
ACCOUNTING IN BUSINESS
Chapter 1
TRANSACTION ANALYSIS AND THE
ACCOUNTING EQUATION
A1
Accounting Equation
Assets
McGraw-Hill/Irwin
= Liabilities + Equity
Slide 9
A1
EXPANDED ACCOUNTING EQUATION
Assets
Owner Capital
=
_
Liabilities
Owner
Withdrawals
+
+
Revenues
Equity
_
Expenses
Owner's Equity
McGraw-Hill/Irwin
Slide 10
A2
TRANSACTION ANALYSIS EQUATION
The accounting equation MUST remain in
balance after each transaction.
Assets
McGraw-Hill/Irwin
=
Liabilities
+
Equity
Slide 11
A2
TRANSACTION ANALYSIS
Textbook Page 14:
Chuck Taylor invests $30,000 cash to start a
consulting business.
The accounts involved are:
(1) Cash (asset)
(2) Owner Capital (equity)
McGraw-Hill/Irwin
Slide 12
A2
TRANSACTION ANALYSIS
Chuck Taylor invests $30,000 cash to
start a consulting business.
Assets
(1) $
$
Cash
30,000
Supplies
30,000 $
$
McGraw-Hill/Irwin
=
30,000
Equipment
Liabilities
Accounts
Notes
Payable
Payable
$
$
=
-
$
$
-
+
Equity
C. Taylor
Capital
$
30,000
$
30,000
30,000
Slide 13
A2
TRANSACTION ANALYSIS
Purchased supplies paying $2,500 cash.
The accounts involved are:
(1) Cash (asset)
(2) Supplies (asset)
McGraw-Hill/Irwin
Slide 14
A2
TRANSACTION ANALYSIS
Purchased supplies paying $2,500 cash.
Assets
(1)
Cash
$
30,000
(2)
$
Supplies
2,500
27,500 $
2,500 $
30,000
Liabilities
Accounts
Payable
Equipment
(2,500) $
$
McGraw-Hill/Irwin
=
-
$
=
-
+
Notes
Payable
$
$
-
Equity
C. Taylor
Capital
$
30,000
$
30,000
30,000
Slide 15
A2
TRANSACTION ANALYSIS
Purchased equipment for $26,000 cash.
The accounts involved are:
(1) Cash (asset)
(2) Equipment (asset)
McGraw-Hill/Irwin
Slide 16
A2
TRANSACTION ANALYSIS
Purchased equipment for $26,000 cash.
Assets
=
Accounts
Payable
Cash
Supplies Equipment
(1) $
30,000
(2)
(2,500) $
2,500
(3)
(26,000)
$ 26,000
$
1,500 $
2,500 $
$30,000
McGraw-Hill/Irwin
Liabilities
26,000
$
=
-
+
Notes
Payable
$
Equity
C. Taylor
Capital
$
30,000
-
$
30,000
$30,000
Slide 17
A2
TRANSACTION ANALYSIS
Purchased Supplies of $7,100 on account.
The accounts involved are:
(1) Supplies (asset)
(2) Accounts Payable (liability)
McGraw-Hill/Irwin
Slide 18
TRANSACTION ANALYSIS
A2
Purchased Supplies of $7,100 on account.
Assets
Cash
Supplies
(1) $
30,000
(2)
(2,500) $
(3)
=
McGraw-Hill/Irwin
1,500
Equity
Accounts
Payable Notes Payable
Equipment
$
C. Taylor
Capital
$
30,000
$
30,000
26,000
7,100
$
+
2,500
(26,000)
(4)
Liabilities
$
9,600
$
37,100
$
26,000
=
$
7,100
$
7,100
$
$
37,100
Slide 19
A2
TRANSACTION ANALYSIS
Provided consulting services receiving $4,200
cash.
The accounts involved are:
(1) Cash (asset)
(2) Revenues (equity)
McGraw-Hill/Irwin
Slide 20
A2
TRANSACTION ANALYSIS
Provided consulting services receiving $4,200
cash.
Assets
Cash
Supplies
(1) $
30,000
(2)
(2,500) $
(3)
=
Equipmen
t
Accounts
Payable
+
Equity
Notes
Payable
C. Taylor
Capital
$
$
(4)
$
7,100
4,200
5,700 $
$
McGraw-Hill/Irwin
30,000
26,000
7,100
$
Revenue
2,500
(26,000)
(5)
Liabilities
9,600 $
41,300
26,000
$
=
7,100 $
$
-
$
$
4,200
30,000 $
4,200
41,300
Slide 21
P1
FINANCIAL STATEMENTS
Let’s prepare the Financial Statements reflecting
the transactions we have recorded.
1.Income Statement
2.Statement of Owner’s Equity
3.Balance Sheet
4.Statement of Cash Flows
McGraw-Hill/Irwin
Slide 22
P1
INCOME STATEMENT
FastForward
Income Statement
For Month Ended December 31, 2009
Revenues:
Consulting revenue
Rental revenue
Total revenues
Expenses:
Rent expense
Salaries expense
Total expenses
Net income
$ 5,800
300
$
6,100
$
1,700
4,400
1,000
700
Net income is the
difference between
Revenues and
Expenses.
The income statement describes a company’s revenues
and expenses along with the resulting net income or
loss over a period of time due to earnings activities.
McGraw-Hill/Irwin
Slide 23
P1
STATEMENT OF OWNER’S EQUITY
FastForward
Income Statement
For Month Ended December 31, 2009
Revenues:
Consulting revenue
Rental revenue
Total revenues
Expenses:
Rent expense
Salaries expense
Total expenses
Net income
$ 5,800
300
The net income of $4,400
increases Owner's Equity
by $4,400.
$ 6,100
1,000
700
1,700
$ 4,400
FastForward
Statement of Owner's Equity
For Month Ended December 31, 2009
C, Taylor, Capital December 1, 2009
$
Plus: Investment by ower
$ 30,000
Net income
4,400
Less: Withdrawals by owner
C. Taylor, Capital, December 31, 2009
McGraw-Hill/Irwin
$
-
34,400
200
34,200
Slide 24
P1
BALANCE SHEET
The Balance Sheet describes a company’s financial
position at a point in time.
FastForward
Balance Sheet
December 31, 2009
Assets
$
Cash
Supplies
Equipment
Total assets
McGraw-Hill/Irwin
$
4,800
9,600
26,000
40,400
Liabilities & Equity
Accounts payable
$
Total liabilities
Equity
C. Taylor, Capital
Total liabilities and equity
$
6,200
6,200
34,200
40,400
Slide 25
P1
STATEMENT OF CASH FLOWS
FastForward
Statement of Cash Flows
For Month Ended December 31, 2009
Cash flows from operating activities:
Cash received from clients
$ 6,100
Cash paid for supplies
(3,400)
Cash paid for rent
(1,000)
Cash paid to employees
(700)
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of equipment
(26,000)
Net cash used in investing activities
Cash flows from financing activities:
Investment by owner
30,000
Withdrawal by owner
(200)
Net cash provided by financing activities
Net increase in cash
Cash balance, December 1, 2009
Cash balance, December 31, 2009
McGraw-Hill/Irwin
$
1,000
(26,000)
$
$
29,800
4,800
4,800
Slide 26
1A - RETURN AND RISK ANALYSIS
A3
A4
Return on assets (ROA) is
stated in ratio form as income
divided by assets invested.
Return on Assets
30 Year Bonds
7.80%
High-risk corporate
6.90%
Medium-risk corporate
5.80%
Low-risk corporate
5.10%
U.S. Treasury
0.00%
McGraw-Hill/Irwin
Risk is the uncertainty
about the return we will
earn.
2.00%
4.00%
6.00%
8.00%
Slide 27
END OF CHAPTER 1
McGraw-Hill/Irwin
Slide 28