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Lecture Financial accounting: Information for decisions (7/e): Chapter 1 - John J. Wild

Chapter 1: Introducing financial accounting. The goals of this chapter are: Explain the purpose and importance of accounting; identify users and uses of, and opportunities in, accounting; explain why ethics are crucial to accounting; explain generally accepted accounting principles and define and apply several accounting principles; define and interpret the accounting equation and each of its components. | Financial Accounting John J. Wild Seventh Edition Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 1 Introducing Financial Accounting Identifies Records Communicates Relevant Reliable Comparable Importance of Accounting Accounting is a system that information that is about an organization’s business activities. C1 1- Identifying Business Activities Recording Business Activities Communicating Business Activities Accounting Activities C 1 1- Financial accounting practice is governed by concepts and rules known as generally accepted accounting principles (GAAP). Generally Accepted Accounting Principles Relevant Information Affects the decisions of its users. Reliable Information Is trusted by users. C 4 Comparable Information Used in comparisons across years & companies. 1- Principles and Assumptions of Accounting C 4 Measurement principle (also called cost principle) means that accounting information is based on actual cost. Going-concern assumption means that accounting information reflects a presumption the business will continue operating. Monetary unit assumption means we can express transactions in money. Revenue recognition principle provides guidance on when a company must recognize revenue. Business entity assumption means that a business is accounted for separately from its owner or other business entities. Matching principle (expense recognition) prescribes that a company must record its expenses incurred to generate the revenue. Full disclosure principle requires a company to report the details behind financial statements that would impact users’ decisions. 1- Time period assumption presumes that the life of a company can be divided into time periods, such as months and years. Liabilities Equity Assets = + Expanded Accounting Equation Revenues Expenses Contributed Capital Dividends _ + _ Retained Earnings Liabilities Equity Assets = + A1 1- Financial Statements These financial statements will be used throughout the semester. Income Statement Statement of Retained Earnings Balance Sheet Statement of Cash Flows P2 1- End of Chapter 1 1- This completes our discussion of chapter one. We have introduced many new concepts and procedures. Your homework assignments will help reinforce most of what we have covered in our presentation. If you have difficulty with your homework assignments, you may want to review this presentation again. Good luck. | Financial Accounting John J. Wild Seventh Edition Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 1 Introducing Financial Accounting Identifies Records Communicates Relevant Reliable Comparable Importance of Accounting Accounting is a system that information that is about an organization’s business activities. C1 1- Identifying Business Activities Recording Business Activities Communicating Business Activities Accounting Activities C 1 1- Financial accounting practice is governed by concepts and rules known as generally accepted accounting principles (GAAP). Generally Accepted Accounting Principles Relevant Information Affects the decisions of its users. Reliable Information Is trusted by users. C 4 Comparable Information Used in comparisons across years & companies. 1- Principles and Assumptions of Accounting C 4 Measurement principle (also