Accounting Information System

1. Accounting Information System

2. Major Accounting Bodies • American Institute of Certified Public Accountants • Financial Accounting Standards Board • Government Accounting Standards Board • Securities and Exchange Commission

3. Ethics The process that individuals use

4. Ethics The process that individuals use to evaluate their conduct

5. Ethics The process that individuals use to evaluate their conduct in light of moral principles and values

6. Assets • Anything of value held by an organization • Assets have

7. Assets • Anything of value held by an organization • Assets have • Potential usefulness

8. Assets • Anything of value held by an organization • Assets have • Potential usefulness • Future usefulness

9. Assets • Anything of value held by an organization • Assets have • Potential usefulness • Future usefulness • Economic Value

10. Assets • Cost principle • Going-concern concept • Objectivity principle • Stable dollar concept

11. Equities • Claims against the total assets of an organization • Liabilities • Claims of nonowners • Owner's Equity • Claims of owners

12. Retained Earnings • Cumulative total of net income, net loss, and dividends since start of business

13. Revenues • Inflows of assets that result from performing services or selling goods • Revenues are realized when • the service is performed or

14. Revenues • Inflows of assets that result from performing services or selling goods • Revenues are realized when • the service is performed or • the goods are delivered

15. Expenses • Outflows of assets or incurrence of liabilities while earning revenues • A business incurrs expenses to earn revenues

16. The Accounting Equation • Things of Value = Claims • Assets = Equities • Assets = Liabilities + Owner's Equity • Assets - Liabilities = Net Assets

17. Analyzing Transactions • Use accounting equation • Is there a change in assets? • Which asset? • How much was the change? • Is there another change in assets?

18. Analyzing Transactions • Is there a change in liabilities? • Which liability? • How much was the change? • Is there another change in liabilities? • Is there a change in owners’ equity? • How much was the change?

19. Four Basic Financial Statements • Income Statement • Statement of Owners’ Equity • Classified Balance Sheet • Statement of Cash Flows

20. Income Statement • Reports changes in owners’ equity from operating activities • Revenues - Expenses = Net Income(Loss)

21. Statement of Owners’ Equity • Changes in owners’ interest in assets • Issuances of new stock • Retained earnings • Net income or loss • Dividends

22. Classified Balance Sheet • Classification - arrangement of financial statement items into groupings that have common basis • Assets • Current • Property, plant, and equipment

23. Classified Balance Sheet • Liabilities • Current • Long-tern • Owners’ Equity • Common stock • Retained earnings

24. Statement of Cash Flows • Reports cash flows during period • Categories of activities • Operating activities • Investing activities • Financing activities

25. Analyzing Information

26. Balance Sheet Analysis • Are total assets higher or lower? • What is percent change in total assets? • Is the percent of total liabilities to total liabilities plus owner’s equity increasing or decreasing?

27. Income Statement Analysis • Are revenues higher or lower? • What is the precentage change in total revenues? • Is the percentage of total expenses to total revenues increasing or decreasing?

28. Integrative Analysis • Is the business operating efficiently by using the least amount of asset investment to generate a given level of total revenues? • Calculate Total Asset Turnover • Total revenues • divided by • Average total assets