会计英语-Chapter-1.ppt

会会计英英语-Chapter-1Objectives of the CoursenDevelop knowledge and understanding of the underlying principles,concepts and regulations relating to financial accountingn Improve technical proficiency in the use of double entry techniques2021/5/222Learning resourcesnTextbookq会计英语第四版，叶建芳 孙红星，上海财经大学出版社nReferences qFundamental Accounting Principles.(19th Edition)by John J.Wild,Ken W.Shaw,and Barbara Chiappetta2021/5/223Assessment of the CoursenPart A:Class performance:20%Class Attendance 10%Class Activities 10%nPart B:Mid-term Examination:30%nPart C:Final Examination:50%2021/5/224Chapter 1Introduction to Accounting2021/5/225ContentsnWhat is accountingnAccounting and its professionnTypes of business ownershipnGenerally accepted accounting principlesnFinancial statements&accounting elements nAccounting equationnProfessional ethics in accounting 2021/5/226What is accountingnAccounting is the process of identifying,measuring,and communicating economic information to various users.-American Accounting Association AAA,1966nAccounting is an information and measurement system that identifies,records,and communicates relevant,reliable,and comparable information about an organizations business activities.2021/5/227Users of Accounting Information2021/5/228Users of Accounting InformationnManagers:make planning and control decisionsnShareholders:make further investment decisionsnLenders:evaluate the credibility of the business to make decisions on providing finance to the businessnCustomers:ensure the quality of goods or service nGovernment:know the resource allocation in the whole economynTax authorities:make tax assessment2021/5/229The accounting profession2021/5/2210The accounting professionnprivate accounting:qemployees working for businesses.nPublic accountingqauditing and tax advice to a vast range of businesses.ngovernment accountingqbusiness regulation and investigation of law violations2021/5/2211The accounting professionnProfessional organizations of accountantsqAmerican Institute of Certified Public Accounts(AICPA)qChinese Institute of Certified Public Accounts(CICPA)qAssociation of Chartered Certified Accountants(ACCA)qAssociation of International Accountants(AIA)2021/5/2212Types of Business ownershipnTypes of BusinessnPrimary industry：Agricultural,rural and mining nSecondary industry:manufacturing and general processing of raw materialsnTertiary industry:trading and service Trading:Wholesale,RetailService:Accountant,Architect,Banker2021/5/2213Types of Business ownershipSole traders(Proprietorship)nFormed and owned by a single person(proprietor,业主),who also manages the businessnIt is an accounting entity but not a legal entityqIn law,the proprietor is legally responsible for the business.qIn accounting,transactions of the proprietorship are accounted for separately from the owners private affairsnUnlimited liabilities:The proprietor is responsible for all debts by the business.nThe life of proprietorship ends when the owner either sells/closes down the business or at the owners death or incapacity.2021/5/2214Types of Business ownershipPartnershipnSimilar to Proprietorship except that there are two or more owners who jointly own the business in predetermined proportions.nIt brings together the resources and talents of two or more peoplenUnlimited liability：Each partner is personally liable for all the debts of the partnershipnPartners share all the profits and bear all losses according to the terms of the partnership agreementnA partnership is terminated when ownership changes through the retirement or death of a partner2021/5/2215Types of Business ownershipnCorporationnA company is an artificial body created through law and owned by shareholdersnA company is a separate legal entity and is able to conduct business in the companys namenPerpetual succession:its existence is unaffected by changes in the ownership of shares in the companynManagement and ownership are usually separatednA Board of Directors is elected to run the business on behalf of the shareholders2021/5/2216Comparison of the three business formsProprietorshipPartnershipCorporationOwnersProprietorone ownerPartnerstwo or more ownersShareholdersmany ownersLife of entitylimited by owners choice or deathlimited by owners choice or deathIndefinitePersonal liability of owner(s)for business debtsProprietor is personally liablePartnership are personally liableShareholders are not personally liable2021/5/2217Advantages&DisadvantagesAdvantagesDisadvantagesProprietorshipManagement and ownership by the same personUnlimited liability for all debtsSubject to less strict government regulationsUnsecured finance may be difficult to obtainPartnershipGreater opportunity because of combined expertise Unlimited liability for all debtsGreater Access to capitalPossible disputes between partnersSubject to less strict government regulationsPartnership has to be reformed each time there is a change in the composition of partnersCorporationLimited liabilities of shareholdersHigh establishment costsPerpetual successionSubject to strict government regulationEasier access to finance2021/5/2218Generally Accepted Accounting PrinciplesnFinancial accounting practice is governed by concepts and rules known as generally accepted accounting principles(GAAP).nGAAP aims to make information in financial statements relevant,reliable,and comparable.nRelevant information affects the decisions of its users.nReliable information is trusted by users.nComparable information is helpful in contrasting organizations.2021/5/2219Generally Accepted Accounting PrinciplesnRevenue RecognitionnMatchingnFull DisclosurenConsistencynMaterialitynConservatismnBusiness entitynObjectivitynCost nGoing ConcernnMonetary UnitnTime Period2021/5/2220Basic Accounting PrinciplesBusiness Entity Principle（会计主体）nA business entity is an organization or section of organization that stands apart as a separate economic unitnThe business is considered separate and distinct from the owner(s)of the businessnTransactions are recorded from the point of view of business,not from the owner(s)or any other business2021/5/2221Basic Accounting PrinciplesObjectivity Principle（客观性）nAccounting should be objective or unbiased.nAccounting information should be free from bias and personal judgmentnAccounting records are based on information that flows from activities documented by objective evidence(invoice,receipts,etc)rather than on subjective judgments.qSuppose you want to buy a small building.You believe it is worth$155000,two real estate professionals appraise it at$147000.The owner demands$160000 and you pay that price.What price should be recorded by the objectivity principle?$160000The objective evidence of a completed transaction supports the price of$1600002021/5/2222Basic Accounting PrinciplesCost Principle（成本原则）nAccounting information is based on actual cost(with a potential for subsequent adjustments to market)nCost is measured on a cash or equal-to-cash basis.nImplicit assumption:Stable-monetary-unit(币值稳定）,the dollars purchasing power is relatively stableqA company bought an car at$100,000 one year ago,and now the price drops and the car can be sold for$80,000.What should be the accounting value of the car one year ago and what is now?One year ago:$100000Now:$1000002021/5/2223Basic Accounting PrinciplesnGoing Concern Principle（持续经营）nThe business is assumed to continue operating instead of being closed or sold.nCosts are spread into the future for as long as the asset will be used in the businessnAssets are reported at cost instead of liquidation values that assume closure.2021/5/2224Basic Accounting PrinciplesMonetary Unit Principle（货币计量）nTransactions must be recorded based in common units of moneynIt is also assumed that the unit of money is stable so that inflationary or deflationary trends are not adjusted for;the original amounts recorded stand.2021/5/2225Basic Accounting PrinciplesTime Period Principle（会计分期）nThe life of a company can be divided into equal time periods,and financial reports are prepared for those periods.nThe time periods covered by financial reports are called accounting periodsn An company usually uses one year as its primary accounting period.nPeriodic reports at regular intervals ensures that decision makers obtain timely information.2021/5/2226Basic Accounting PrinciplesRevenue Recognition Principle（收入确认）nRevenue is recognized when earned regardless of when cash is received.nRevenue is recorded when earned.qThe earnings process is complete when services are performed or a seller transfers ownership of products to the buyer.nProceeds from selling products and services need not be in cash，e.g.credit sales.nRevenue is measured by the cash received plus the cash value of any other items received.2021/5/2227Basic Accounting PrinciplesMatching Principle（配比）nAccounting reports should match against revenue of all the cost(expenses)incurred in earning that revenue regardless of when they are paidnExpenses should be reported in the same accounting period as revenues that were earned as a result of those expenses.qA client pays Air&Sea$900 on March 15 for service to be performed from April 1 to June 30.Has Air&Sea earned revenue on March 15?qAir&Sea pays$4500 on July 31 for office rent for the next 3 months.Has the company incurred expense on July 31?2021/5/2228Basic Accounting PrinciplesnFull Disclosure Principle（充分披露）nFinancial statements and their accompanying notes include all relevant information about the operations,financial position of the entity.nAll material and relevant information should be communicated to users in financial reports.qA business might be involved in litigation,the contingent(possible)liability must be disclosed,as its suppression could materially affect investment decisions by users2021/5/2229Basic Accounting PrinciplesConsistency Principle（一致性）nA business should use the same accounting methods and procedures from period to periodnAn accounting method once adopted should not be changed during an accounting period.nConsistency helps to see the trends in financial position and make comparisons unclouded by changes in accounting methodnA significant change and its monetary effect must be fully disclosed in the financial reports 2021/5/2230Basic Accounting PrinciplesMateriality Principle（重要性）nThere should be disclosure of any information which is likely to influence any decision based on the accounting reportsnAn amount may be ignored if their effects on the financial statements is not important to users.nInformation is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statementsnContext matters:what is relevant to a small shop might be immaterial to a major corporation2021/5/2231Basic Accounting PrinciplesnConservatism Principle（谨慎）nThe least optimistic estimate should be selected if two or more alternatives are available.nPrudence is to be used when judgments or estimates are unavoidable.n When risk or uncertainty exists,the preference for possible accounting measurement errors should be in the direction of understatement rather than overstatement of assets and income.2021/5/2232Financial StatementsnBalance sheet(Statement of financial position)nIncome statementnStatement of cash flowsnStatement of Owners Equity2021/5/2233Balance Sheet（资产负债表）nBalance Sheet:a list of all assets owned and all the liabilities owed by a business at a specific point in time.Assets:（资产）（资产）resources controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity Tangible assets and intangible assetsCurrent assets and non-current assetsLiabilities（负债）（负债）:creditors claims on assets.Present obligations of the entity arising from past events,the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits.Equity（权益）（权益）:owners claim on assets.It is the amounts invested in a business by the owner.equity=assets-liabilities 2021/5/2234Income Statement（利润表）nIncome statement is a record of income generated and expenditure incurred over a given period.qShows whether the business has a profit or loss over a periodnRevenue（收入）:the income generated by the business for a period.qincreases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in increases in equity,other than those relating to contributions from equity participants.2021/5/2235Income StatementnExpenses（费费 用用）are the costs of running the business for the same period.qdecreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurring of liabilities that result in decreases in equity,other than those relating to distributions to equity participants.nNet profit/Net income:the excess of revenues over expenses for that timenNet Loss:the excess of expenses over revenues for that time2021/5/2236Statement of Owners Equity（所有者权益表）nThe statement of owners equity（statement of retained earnings）reports information about how equity changes over the reporting period.nThe statement of owners equity lists：qbeginning capitalq events that increase it:owner investments and net incomeqevents that decrease it:owner withdrawals(提取)and net loss.qEnding capital nEnding capital is carried over and reported on the balance sheet.2021/5/2237Statement of Cash Flows(现金流量表)nStatement of cash flows lists the cash inflows and outflows from operating activities,investing activities,and financing activities over a period.nOperating activities:cash flows related to revenues and expenses of the business tradingnInvesting activities:cash flows related to increases and decreases in the non-current assetsnFinancing activities:cash flows related to the funding of the business by owners and lenders2021/5/2238Financial Statements and Their LinksNet income is used to compute equityOwner capital is used to prepare the balance sheet.Cash from the balance sheet is used to reconcile the statement of cash flows.A single ruled line denotes an addition or subtraction.Final totals are double underlined.Negative amounts are often in parentheses.2021/5/2239The accounting equation（会计等式）nAccounting equation Assets=Liabilities+Owners EquitynEvery transaction affects at least two elements in the accounting equation.nThe accounting equation remain in balance after each transaction.nOwners equity is directly affected by revenues,expenses,owners capital and owners withdrawals.nThe expanded accounting equation2021/5/2240The Accounting EquationnChanges of two elementsqAny increase(decrease)in Assets must be accompanied by a corresponding increase(decrease)in either Liabilities or Owners EquitynChanges within one elementqAny increase(decrease)in one type of Assets（Liabilities/Owners Equity）must be accompanied by a corresponding decrease(increase)in another type of Assets（Liabilities/Owners Equity）nIf the Assets