ACTG 241

1. ACTG 241 August 28, 2019

2. Announcements • Friday: BE HERE! We will create groups. • Seating Chart will be created Monday. • Monday: Sit “near” your group. • If you are absent Monday, … …have your group save a seatand write your name on the seating chart when it comes around.

3. The Role of Accounting COMPREHEND & LEARN. DON’T JUST MEMORIZE WORDS

4. What is Accounting? Accounting is the process of recording and tracking where the entity’s financial resources came from, where they are, and where they went, … and preparing reports (for insiders and outsiders) which provide useful information for decisionmaking. Accountants also prepare forecasts and plans, predicting where future financial resources will come from and go to (called “budgeting”), … and prepare tax returns and other reports. Accountants also analyze accounting data and make recommendations about future courses of action for management to consider. … and also help management design, implement, operate and monitor Internal Controls: procedures and processes that promote accuracy and reliability of recordkeeping and reporting, efficiency and effectiveness of operations, and compliance with laws, regulations, policies, etc.

5. Distinguish between… • Bookkeeping • Financial Accounting • Managerial Accounting • Tax Accounting • Forecasting and Budgeting • In-depth analysis of accounting data • Auditing, Internal Control testing

6. Private accountants work for a company or other entity. MANAGEMENT ACCOUNTANTS Management Accountants do MORE than just bookkeeping. .

7. Private accountants work for a company or other entity. MANAGEMENT ACCOUNTANTS Management Accountants do MORE than just bookkeeping. Management Accountants … prepare the financial statements,

8. Private accountants work for a company or other entity. MANAGEMENT ACCOUNTANTS Management Accountants do MORE than just bookkeeping. Management Accountants … prepare the financial statements, analyze the data, make recommendations to management, oversee the preparation of the budget, and often help tax accountants prepare the tax returns.

9. Private accountants work for a company or other entity. MANAGEMENT ACCOUNTANTS Management Accountants do MORE than just bookkeeping. Management Accountants … prepare the financial statements, analyze the data, make recommendations to management, oversee the preparation of the budget, and often help tax accountants prepare the tax returns. They also help management design, implement, operate, and monitor the Internal Control systems.

10. Public accountants hire themselves out... …and can do everything (for their clients) that management accountants do for their companies. But they can also perform financial audits on a company’s financial statements, BUT NOT FOR CLIENTS FOR WHOM THEY PERFORM OTHER ACCOUNTING SERVICES! Independent Financial Auditor

11. Accountants must follow GAAP Generally Accepted Accounting Principles GAAP is established by the FASB Financial Accounting Standards Board

12. Accountants must follow GAAP Generally Accepted Accounting Principles GAAP is established by the FASB Financial Accounting Standards Board

13. PAY CLOSE ATTENTION

14. “The ENTITY Principle”

15. OWNER’S EQUITY “The ENTITY Principle” LIABILITIES REVENUE

16. Four Primary Financial Statements • Income Statement • Balance Sheet • Statement of Changes in Equity • Cash Flow Statement RESULTS OF OPERATIONS FINANCIAL POSITION

17. Elements of the Financial Statements ASSETS LIABILITIES EQUITY

18. Elements of the Financial Statements + = ASSETS LIABILITIES EQUITY “The Accounting Equation”

19. Elements of the Financial Statements FINANCIAL POSITION: BALANCE SHEET ASSETS LIABILITIES EQUITY 1. Contributed Capital Revenue RESULTS OF OPERATIONS: INCOME STATEMENT - Expenses 2. Net income + Gains - Losses 3. - Distributions

20. Elements of the Financial Statements ASSETS LIABILITIES EQUITY 1. Contributed Capital Revenue - Expenses 2. Net income + Gains - Losses 3. - Distributions

21. Elements of the Financial Statements ASSETS LIABILITIES EQUITY 1. Contributed Capital 2. Net income Retained Earnings 3. - Distributions

22. Primary Financial Statements • Income Statement • Balance Sheet • Statement of Changes in Equity ASSETS LIABILITIES EQUITY Contributed Capital Retained Earnings

23. Primary Financial Statements • Income Statement • Balance Sheet • Statement of Changes in Equity Contributed Capital + Net income - Distributions Retained Earnings

24. Primary Financial Statements • Income Statement • Balance Sheet • Statement of Changes in Equity Revenue -Expenses Net income +Gains -Losses

25. Primary Financial Statements • Income Statement • Balance Sheet • Statement of Changes in Equity • Statement of Cash Flows Operating Activity Investing Activity Financing Activity

30. The owner starts a business by contributing $120,000 to the new company. He issues 2 shares of stock at $60 per share to himself. 120 120

31. The company borrows $400,000 from the bank, signing a Note Payable. 120 120 400 400

32. The company buys land for $500,000. 120 120 400 400 500 -500

33. The company provides services to a customer for $85,000. It costs the company $50,000 to provide those services The company returns $4,000 to its stockholder as a cash dividend 120 120 400 400 500 -500 85 85 -50 -50 -4 -4

35. 120 120 400 400 500 -500 85 85 -50 -50 -4 -4 -4 120 35

37. 120 120 400 400 500 -500 85 85 -50 -50 -4 -4 -4 51 500 120 35 400 31

40. See You Friday DON’T FORGET…. Homework Assignment 2