123Introduction to AccountingBy: Corene Procope-FrancisThe animation is already done for you; just copy and paste the slide into your existing presentation. Session OutlineLearning ObjectivesIntroductionWhat is AccountingUsers of Accounting InformationTypes of Business Intro to Double entry book-keepingReview

Learning ObjectivesAfter this session, you should be able toUnderstand the nature and scope of AccountingCompare features of proprietorships, partnerships, and corporations.Identify Financial StatementsUnderstand Double Entry Book-keeping

INTRODUCTIONAccounting Decision Making by the Numbers

Entrepreneurs account for their income and expenses Personal management of cash inflows e.g. salary and outflows e.g. rent, groceries, etc. Marketing analyze marketing campaigns against gross sales HR - budget for training, recruitment, employee vacation costs, etc.I know many of us who dont have an accounting background or has a dislike for numbers, is dreading this course and wondering what benefit is doing this course to me. We use accounting methods everyday e.g. Our monthly budget.CFO grew from 13% to 26% whilst COO fell from 46% to 36%

4What is AccountingA process of identifying, recording, summarizing, and reporting economic information to decision makers in the form of financial statements

Accounting helps in decision making by showing where and when money has been spent, by evaluating performance, and by showing the implications of choosing one plan instead of another.

There are two types of Accounting Management and FinancialManagement vs Financial Accounting

7The Flow of Accounting Information

1. Business transactions occur3. Users make decisions from these reports.2. Businesses prepare reports to show the results of their operations The Accounting EquationFinancial accounting is based upon the accounting equation.Assets = Liabilities + Owners' Equity This is a mathematical equation which must balance. If assets total $300 and liabilities total $200, then owners' equity must be $100.1. Business transactions occurAssets - resources of the firm that are expected to increase or cause future cash flows (everything the firm owns)E.g. Land, Building, Cash, Inventory, etc.Liabilities - obligations of the firm to outsiders or claims against its assets by outsiders (debts of the firm)E.g. Accounts payable, loan payable, etc.Owners Equity - the residual interest in, or remaining claims against, the firms assets after deducting liabilities (rights of the owners)Capital invested, Retained Earnings/Net ProfitThe Accounting Equation1. Business transactions occur9Financial StatementsBusinesses record their performance in standard formats called financial statements. The most common of these are:Balance Sheet (also known as a Statement of Financial Position, or a Statement of Financial Condition) Assets, Liabilities & Owners EquityIncome Statement (Statement of Profit and Loss, Statement of Earnings, Statement of Operations). Revenue & Expenses Cash Flow Statement.

2. Businesses prepare reports to show the results of their operations 1011Identificationof Users

IndividualsBusinessesInvestors andcreditorsGovernmentregulatoryagenciesTaxingauthoritiesNonprofitorganizationsUsers of Accounting InformationThe animation is already done for you; just copy and paste the slide into your existing presentation. 12EXTERNAL USERSInvestorsCreditorsGovernmentCustomersCompetitorsThe PublicOwnersManagersEmployeesINTERNAL USERSUsers of Accounting InformationAccounting as an Aid to Decision MakingInvestors want to know if a company is a good investment.

Government want to know how legislation will affect tax revenue

Management want to know if a new product will be profitable.

Creditors want to know if they should extend credit, how much to extend, and for how long.

Employees want to know if the business is profitable, for bonus payouts and job security.

Shareholders want to see the return on their investment.

Types of OwnershipThree basic forms of ownership:Sole proprietorshipsPartnershipsCorporations

14Sole Proprietorship or Sole TraderA separate organization with a single ownerTend to be small retail establishments and individual professional or service business - for example, a single dentist, attorney, hairdresser or mechanicThe sole proprietorship is an individual entity that is separate and distinct from the owner.The owner is an active manager in day-to-day operation of the business Lisas invested personal funds of $1,000 into Ls Hair-salon. Buys a hairdryer for $400 from Courts on Hire Purchase.ASSETSOWNERS EQUITYLIABILITIESCash 1,000 Equipment 400=Capital 1,000 Accounts Payable 400 15PartnershipAn organization that joins two or more individuals who act as co-ownersDentists, doctors, attorneys, and accountants tend to conduct their activities as partnerships. Some can be large international firms e.g. PWC and Ernst & YoungThe partnership is an individual entity that is separate and distinct from each of the partners. Partners are usually active managers in day-to-day operations of the business.

16CorporationAn artificial entity created under state lawsCorporations have limited liability - corporate creditors have claims against corporate assets only.Individual investors are at risk only up to the amount they have invested in the corporation. Creditors cannot hold investors liable for the corporations debts.Shareholders usually do not participate in the day-to-day operations of the business.

1718 Double-entry accounting is based on a simple concept: each party in a business transaction will receive something and give something in return. In bookkeeping terms, what is received is a debit and what is given is a credit. The T account is a representation of a scale or balance.

One debitOne creditEach transaction is recorded with at least:Total debits must equal total credits.The Double-Entry systemThe Double-Entry systemScale or Balance

ReceiveDEBITGiveCREDITT accountLeft SideReceiveDEBITRight SideGiveCREDITThe system records the two-sided effect of transactionsCredit and Debit are the two fundamental aspects of every financial transaction in the double-entry bookkeeping system

The Double-Entry systemASSETEXPENSELIABILITYINCOMEEQUITYINCREASEDEBITDEBITCREDITCREDITCREDITASSETEXPENSELIABILITYINCOMEEQUITYCREDITCREDITDEBITDEBITDEBITDECREASE

Transaction Two-sided effect

Bought furniture for cash Decrease in one asset (Cash/Bank) Increase in another asset (Furniture)

Took a loan in cash Increase in an asset (Cash/Bank) Increase in a liability (Loan Payable)The Double-Entry systemNote that the accounting equation equality is maintained after recordingeach transaction.Practical Example T-accountsY Started a business with $20,000.Bought Furniture for $4,000 cash.Bought a van for $12,000 via cheque.Purchased goods for resale from Z for $6,000 on credit.Took a Loan of $10,000 in cash.Repaid $3,000 to Z via cheque.Withdrew $3,000 from the business for personal use.

T accountLeft SideReceiveDEBITRight SideGiveCREDIT23REVIEWBusiness TransactionsDouble EntryDebit & CreditThe Accounting EquationFinancial StatementsBalance SheetIncome StatementCash Flow StatementUsers of Financial StatementsManagementCreditorsShareholderTypes of BusinessSole TraderPartnershipCorporations4mthsMay-14June-14Sun MonTueWedThuFriSatSun MonTueWedThuFriSat1231234567

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&G&"Batang,Bold"&14&E&K09+000IMBA CALENDAR

2mths (CP)IMBA 53 CALENDAR Y2/T-II

July-15August-15Sun MonTueWedThuFriSatSun MonTueWedThuFriSat12341MONTH OF JULYRisk Mgmt5678910112345678Global Strategic Mgmt & InnovationGlobal Strategic Mgmt & Innovation EXAM (1PM)RISK MANAGEMENT EXAM (9am)CORPORATE FINANCE EXAM (1pm)Corporate FinanceBus. Law, Corp Gov & EthicsRisk Mgmt121314151617189101112131415Global Strategic Mgmt & InnovationCorp Gov Individual Assignment DueBusiness Planning Workshop (9-4)Bus. Law, Corp. Gov & Ethics EXAM (9am)Bus. Law, Corp Gov & Ethics (CSR)Corporate FinanceBus. Law, Corp Gov & EthicsRisk Mgmt - CW Exam (MCQ)19202122232425Business Planning Workshop (am)Business Law Discussion forum 2 closesGlobal Strategy - Group Assignment DueCorporate Finance Group PresentationBus. Law, Corp Gov & Ethics (CSR)Risk Mgmt262728293031Corp. Social Resp Group Assignment DueRisk Mgmt - Group Submission & Presentation

"Im not telling you it is going to be easy Im telling you its going to be worth it." Art WilliamA goal is a dream with a deadline. Napoleon Hill

2mths IMBA 53 CALENDAR Y2/T-II

July-15August-15Sun MonTueWedThuFriSatSun MonTueWedThuFriSat12341MONTH OF JULY

5678910112345678Global Strat Mgmt Ind. Assignment 2 due dateGlobal Strategic Mgmt & InnovationGlobal Strategic Mgmt & Innovation EXAM (1PM)RISK MANAGEMENT EXAM (9am)CORPORATE FINANCE EXAM (1pm)Bus. Law, Corp Gov & Ethics121314151617189101112131415Global Strategic Mgmt & InnovationCorp Gov Individual Assignment DueBus. Law, Corp. Gov & Ethics EXAM (9am)Bus. Law, Corp Gov & Ethics (CSR)Bus. Law, Corp Gov & Ethics19202122232425Global Strategy - Group Case Assignment DueBus. Law, Corp Gov & Ethics (CSR)262728293031Corp. Social Resp Group Assignment Due

"Im not telling you it is going to be easy Im telling you its going to be worth it." Art WilliamA goal is a dream with a deadline. Napoleon Hill

Sheet1OLOnlineGSMIGlobal Strategic Mgmt & InnoBLBusiness LawRMRisk Mgmtam9am-12pmpm1pm-4pmCFCorporate FinanceMUMake-up ClassCWCourse WorkMCQMultiple Choice Quiz

Sheet3Management AccountingFinancial AccountingPurposeDecision makingCommunicate financial position to outsidersPrimary UsersInternal managersExternal usersFocus/EmphasisFuture-orientedPast-orientedRulesDo not have to follow GAAP; cost vs. benefit analysisGAAP compliant; AuditedTime SpanUltra current to very long time horizonsHistorical monthly, quarterly reportsBehavioral IssuesDesigned to influence employee behaviorIndirect effects on employee behavior