Accounting 1 Accounting Lecture 1: Accounting and Business Environment Lisa, Li

and Business Environment
Lisa, Li

your nickname
Chat window will help us a lot
When you join

in our class ,please keep your Microphone silenced. During the discussion, you can reopen it by yourself.

Summary handout (preview)
PPT slides(preview)
‘Try it’ Questions,
Chapter Overview,
10-mins quizzes

and Review Q (homework)
Short Exercises, and critical thinking cases

Accounting

2

Matsumura Mae Ella, Horngren’s Accounting, Pearson, 10th edition, Global edition
Other

Reference Books:
Randall & Hopkins, Cambridge International AS and A Level Accounting
Warren,C. Reeve, J.& Fess P. Principles of Accounting（23rd ed）
by and Wild, J. Financial Accounting Fundamentals

Accounting

Introduction of accounting
Accounting and Business Environment
Financial Accounting vs. Managerial

Accounting
Five Groups (elements)of Accounts
Basic Accounting Principles
The Accounting Process
Mid-term exam

Accounting

Prepare Financial Statement
Adjusting process
Closing process
The Accounting cycle
Common Accounting ratios
Final examination

Accounting

15%
multiple choices, ‘try it’

Q, practices in class
Mid-term Exam 15%
textbook and PowerPoint
Final Exam 70%
-textbook, PowerPoint and practices in class
-multiple choices, short answers and accounting cases
More than 60% of total marks will pass

Accounting

Experience of Learning Accounting
Spend more time on the beginning part

(Chapter 1,2)
Theory → Practice → Theory
professional business language
Materials: textbook, PPTs and reference books
Download IAS，IFRS and AASB from official website

Accounting

Accounting assumptions
Accounting Principles
Two basic branches of accounting:

MA and FA

Accounting

What Is Accounting?
Accounting is an information

process, which is related with collecting and recording financial information from business organizations, and communicating relevant financial information to stakeholders.
information process: identifying, collecting, classifying, recording and communicating
stakeholders: persons or entities have interest in the economic performance of the business. e.g. managers, creditors, bankers
Global and professional business language

Accounting

Directors
Internal Auditors
Sales Staff
Budget Officers
Controllers
CEO, CFO

the following are external users of a business’s financial information?

A. Taxing authorities
B. Customers
C. Employees
D. Creditors
E. Board of Directors
(tip: two or more than two correct answers)

information for decision-making purposes.
Local, state, and federal governments use

accounting information to calculate firm’s income tax.
A creditor is a person who owes money to the business.
Different users of financial statements focus on the different parts of the financial statements for the information they need.

For individual
Saving and Managing money

Statement of Financial Performance (oversea student)

Accounting

4 Accounting Firms
Internal auditors,
Controllers,
finance and accounting specialists in bank,
Tax accountants（CPAs）
cost

accountants(CMAs),
Business system analysts, Financial analysts

Accounting

¾ auditing markets,
Company’s Income : more than $20 billion/year
“Famous

customers”: majority customers are world's top 500 enterprises.
Eg. Walmart, Albaba, Google, HSBC
Employment: 17,000-20,000
staffs in 70 countries, including
10,000 Chinese employees.
Departments: auditing, taxes, advisory

Tax

Advisory

Auditing

for Business Firms
All the businesses and organizations need accountants.
Financial

Annual Reports—public firms
Budegt, project plan,Managerial report
Internal Control – accounting information system
Financial and Strategic Decisions

Accounting

FASB in USA IASB in

UK
II. Guidelines for Accounting Information
GAAP IFRS
III. Basic Accounting assumption and Principles

Accounting

(SEC)
Financial Accounting Standards Board (FASB)
International Accounting Standard Board (IASB), which

publish International Financial Report Standard (IFRS)

 the importance of the convergence of accounting standards at a global level.

Accounting

governmental agency that oversees the US financial markets. It also

oversees FASB.
The SEC was established by the Securities Act of 1934
the SEC requires that all publicly traded companies have an annual financial statement audit that is conducted by a Certified Public Accountant.
The SEC delegated that standard-setting responsibility to the accounting profession.

is a private organazation.
Creates the rules and standards that

govern financial accounting
It oversees the creation and governance of U.S.GAAP (accounting standards).
IASB in UK
the International Accounting Standards Board (IASB), located in London, has established a body of International Financial Reporting Standards, IFRS, that are used by a majority of other countries.

Accounting

is the main US accounting rule book and is issued

by the FASB.
GAAP rests on a conceptual framework that identifies the objectives, characteristics, elements and implementation of FS and create the acceptable accounting practices.
The SEC requires that American businesses follow U.S. GAAP.

Accounting

for recording transactions and preparing financial statements.
Published online as part

of the Accounting Standards Codification.
Requires that information be useful.

Relevant = The info allows users to make a decision.

Faithfully Representative = The info is complete, neutral, and free from material error.

Accounting

(IFRS)
A set of global accounting guidelines , formulated by the

International Accounting Standard Board.
IFRS is a set of global accounting standards that are used or required by more than 120 nations.
A publicly traded company in the United States come under SEC regulations as long as it follows the rules of GAAP.

Accounting

Accurate Policies.
Global Accommodation Accounting Principles.
Generally Accredited Accounting Policies.
Generally Accepted Accounting

Principles.

Goning Concern Assumption
3. Monetary Unit assumptiom
4. The Cost principle
5. The

Accounting Equation
6. Profit Determination
7. Double-entry bookkeeping
8. Matching principle
9. Reporting Principle

Accounting

a family owns the firm and control business,small business such

as laundries, repair shop,newsstand.
Partnership multiple individuals, called general partners, manage the business and are equally liable for its debts.e.g.dentist office, law firms.
Corporation Firm that meets certain legal requirements to be recognized as having a legal existence, as an entity separate and distinct from its owners. e.g. General Motor, IBM
Limited-Liability Company (LLC) a company in which each member is only liable for his or her own actions. Indefinite life. e.g. Big 4 Auditors

Accounting

that the entity will continue to operate for the foreseeable

future.

This assumption is essential if we expect businesses to engage in long term agreements. For example, a manufacturer would not likely enter into a long-term sales agreement with a customer, if it believed that that customer would soon be out of business.

Accounting

the financial statements to be measure in terms of a

monetary unit.
In the United States, we record transaction in American dollars($).
In UK, we record transaction in Yuan (¥). Pound(￡).
In china, we record transaction in Chinese Yuan (¥)
Albaba, big multinational Chinese company, should be record in American dollars or
Chinese Yuan? And why?

Accounting

recorded at their actual cost (historical cost) on the date

of acquisition.
all liabilities should be recorded at their actual cost, when it happened.
We record a transaction at the amount shown on the receipt(or contracts)- actual amount paid.
Not at “expected cost” or “current relevant market value”.
Eg. the company bought the Land with building at $300,000 20 years age, now the land price increases dramatically.

Accounting

a partnership firm requires a minimum of:
A) four partners.
B) three

partners.
C) one partner.
D) two partners.

the following accounting concepts should the acquired assets be recorded

at the amount actually paid rather than at the estimated market value?
Monetary unit assumption
Cost principle
Economic entity assumption
Going concern assumption

Public Sector Accounting
– governments



Accounting

to make better decisions for the organization and improve the

efficiency
IMA: large U.S. professional organization of accountants, focus on internal accounting
Licensed as Certified Management Accountant(CMA)
Financial accounting(FA)
Stakeholders, particular external parties - comply with IASs, GAAP;external users
Licensed as Certified Public Accountant(CPA)

Hall

used by:
taxing authorities.
auditors.
lenders.
internal decision makers.

the accounting information system.
Management accounting makes use of the outcome

of financial accounting.