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Junior Accounting Practice ( )

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Part one Fundamentals of Accounting 1 1. Introduction to Financial Accounting 2. Balance Sheet Concepts :Assets, Liabilities, and Equities 3.Income Statement Concepts: Income, Revenues, and Expenses 4.Statement of Cash Flows: Operating, Investing, and Financial Activities

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Chapter one What Is Accounting? ( 2 ) Objective: Learn what financial accounting is. Accounting is the gathering and reporting of a financial history of an organization. Keeping this financial history is a continual process of capturing financial data, organizing it into a useful set of accounting records, and issuing periodic financial reports to users. We will see that accurate, up to date financial reports contain a great deal of useful information.

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Framework for Understanding Accounting Information Objective: Learn what economic information is conveyed in financial statements. Three things determine the information in accounting reports : economic concepts, accounting conventions, and institutional context. 1. Economic concepts are the ideas that guide the construction of accounting reports. 2. Accounting conventions are the rules and customs of accounting that help apply those economic concepts to practical situations. 3. Institutional context is the environment that shapes the consequences of adopting special accounting conventions.

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Why Study Accounting? ? Objective: Learn how accounting information is used and why it is important. Making Many decisions can be improved with accounting information. Accounting Is More Than Just Numbers. All users will benefit by being aware of more than just the numbers and descriptions in the accounting reports.

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Economic Concepts Objective: Learn a framework for understanding accounting information. Financial Value The financial value of an item is the amount of money it would bring if sold. Wealth An organizations wealth is the sum of the financial values of all the things it owns. Economic Income An organizations economic income over a period is the change in its wealth, excluding capital transactions with its owners.

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Accounting Convention Objective: Learn to read actual financial statements by looking at excerpts from the reports of real companies. Nature of Accounting Conventions GAAP Accounting valuation Recognition Disclosure Factors Affecting Accounting market richness complexity of transactions form of organization

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Chapter two 2 In this chapter you will learn: 1.Basic definitions of assets, liabilities, and equities 2.To analyze transactions in terms of their effects on balance sheet accounts 3.To use debits, credits, and T-accounts to analyze transactions and construct balance sheets 4.To begin to read real company reports

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Basic Definitions and Theory Objective: Learn basic definition of assets, liabilities, and equities. Assets ( ) is a probable future economic benefit obtained or controlled by an entity as a result of a past transaction. Cash Marketable Securities Accounts Receivable Inventory Prepaid Expenses Deferred Income Taxes Property, Plant, and Equipment Other Assets Patents, Copyrights, Trademarks, Licenses

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Basic Definitions and Theory Objective: Learn basic definition of assets, liabilities, and equities. Liabilities ( ) is a probable future sacrifice of economic benefits arising from present obligations of an entity to transfer assets or provide services as a result of a past transaction or event. Accounts Payable Accrued Liabilities Short-Term Borrowing Dividends Payable Bonds

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Basic Definitions and Theory Objective: Learn basic definition of assets, liabilities, and equities. Equities( ) Total equity is the difference between total assets and total liabilities. Common Stock Additional Paid-In-Capital Preferred Stock Accounting Equation ASSETS = LIABILITIES + EQUITY

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T-Accounts, Debits, and Credits Objective: Learn to use debits, credits, and T- accounts to analyze transactions and construct balance sheets. Assets Increases Decreases (Dr) (Cr) Liabilities/Equities Decreases Increases (Dr) (Cr) DEBITS=CREDITS ASSETS=LIABILITIES+EQUITIES

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Chapter three ( 3 ) In this chapter you will learn: 1.Basic definition of income, revenue, and expense 2.To analyze transactions in terms of their effects on income statement accounts 3.To use debits, credits, and t-accounts to analyze transactions and construct income statements

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Income (Loss) ( ) Objective: Learn basic definitions of income, revenue, and expense. 1. Income is an increase in a entitys net assets resulting from its operations over a period of time. If an entitys operations over a period of time result in a decrease in its net assets, it has a loss. NET ASSETS= ASSETS-LIABILITIES=EQUITIES 2. Revenues are increases in net assets resulting from operations over a period time Recognition is the act of making an entry into the accounting. 3. Expenses are decreases in net assets resulting from operations over a period of time. Matching is the process of making sure all the costs incurred in generating the revenues recognized in a period are taken as expenses in that period.

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Chapter four ( 4 ) In this chapter you will learn: 1.The basic definition of cash 2.To understand the relation between net income and cash flow from operations 3.To distinguish cash flows from investing, financing, and operating activities 4.Two methods for constructing cash flow statements (the direct and indirect methods) Cash Flow Statements

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Cash( ) Cash is readily transferable value Different forms of cash : Currency Checking accounts

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Investing activities ( ) Investing activities are actions aimed at acquiring and disposing of assets that generate a financial return over a long period of time

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Financing Activities ( ) Financial activities are actions aimed at acquiring and repaying funds to be used over a long period of time.

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Operating Activities ( ) Operating activities are actions that are neither investing nor financing activities.

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Methods of Deriving Cash Flow Statement Objective: Learn two methods for constructing cash flow statements (the direct and indirect methods). Direct Method The direct method of presenting cash flows statements presents cash flows from operations in terms of their uses and sources. Indirect Method The indirect method of presenting cash flows from operations shows how net income must be adjusted to get back to cash flows.

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Part two 2 Valuation Basics and Accounting 5. Economic Concepts: Behind the Accounting Numbers 6. Financial Statement Analysis: Connecting Economic Concepts to Accounting Reports

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Cash flows and Economic Value ( ) Objective: Learn to understand the role of cash flow in determining economic value Cash is king. Economic value of an assets is determined by the cash flows and the cash flow will generate.

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Cash flows over time: The Time Value of Money Objective: Learn how to compute compound interest Present Value Future Value Uncertain Cash Flows: Expected Value Time and Uncertainty:

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Chapter six ( 6 : ) In this chapter you will learn: 1. How stock markets provide estimates of the economic values of firms. 2. What financial statement analysis is and begin to develop a conceptual framework for it. 3. Two basic ratios useful in financial analysis Financial Statement Analysis: Connecting Economic Concepts to Accounting Reports

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Alternative Measures of Value: Alternative Measures of Value: A Framework for Financial statement Analysis 1.The Value of a firm in the Stock Market 2.GAAP Valuation 3.Financial Statement Analysis 4.Conceptual Framework for Financial Statement Analysis

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Part three 3 ) Topics in Financial Reporting 7.Accounts Receivable 8.Inventories 9.Marketable Securities 10.Long-lived Assets 11.Long-term Liabilities 12.Equities 13.Income Taxes 14. Financial Statement Analysis and the Valuation of Common Stock

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Chapter seven ( 7 ) In this chapter you will learn: 1.To understand the definition of accounts receivable 2.To analyze the economic value of accounts receivable

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Accounts Receivable Nature of Accounts Receivable Economic Value of Accounts Receivable GAAP for Accounts Receivable Determining Bad Debt Expense and the Allowance for Bad Debts Financial Statement Analysis of Accounts Receivable

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Chapter eight ( 8 ) In this chapter you will learn: 1.To understand the definition of inventories 2.To analyze the economic value of inventories.

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Inventories Nature of Inventories Economic Value of Inventories GAAP for Inventories Financial Statement Analysis of Inventory

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Chapter nine ( 9 ) In this chapter you will learn: 1.To understand the definition of marketable securities 2.To analyze the economic value of marketable securities

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Marketable Securities Nature of Marketable Securities Economic value of Marketable Securities GAAP for Marketable Securities Financial Statement Analysis of Marketable Securities

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Chapter ten ( 10 ) In this chapter you will learn: 1.To understand the definition of tangible and intangible long-lived assets 2.To analyze the economic value of long- lived assets Long-Lived Assets

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Long-Lived Assets Nature of Long-Lived Assets Economic value of Long-Lived Assets GAAP for Long-Lived Assets Financial Statement Analysis of Long- Lived Assets

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Chapter eleven ( 11 ) In this chapter you will learn: 1.To understand the definition of long-term liabilities 2.To analyze the economic value of long-term liabilities Long-Term Liabilities

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Long-Term Liabilities Nature of Long-Term Liabilities Economic value of Long-Term Liabilities GAAP for Long-Term Liabilities Financial Statement Analysis of Long-Term Liabilities

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Chapter twelve ( 12 ) In this chapter you will learn: 1.To understand the nature and function of equities 2.To understand more about the distinction between debt and equities 3.To discuss the economic value of common stock equities

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Nature of Equities Economic value of Equities GAAP for Equities Financial Statement Analysis of Equities

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Chapter thirteen ( 13 ) In this chapter you will learn: 1To understand the nature and function of income taxes 2To analyze how income taxes impact the economic value of a firms assets and liabilities

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Income Taxes Nature of Income Taxes Tax Accounting Principles Depreciation Assets Impairments Economic Value of Deferred Income Taxes GAAP for Deferred Income Taxes

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Chapter fourteen ( 14 ) In this chapter you will learn: 1.To use your knowledge of accounting in analyzing financial reports 2.To use accounting fundamentals to forecast future cash flows 3.To use projections of future cash flows to estimate the value of a company

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Financial Statement Analysis and the Valuation of Common Stock Valuation of a company using discounted cash flow analysis Time-series benchmarks Current Ratio Quick Ratio Debt-to-Equity Long-Term Debt-to-Equity Cross-Sectional Benchmarks

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Explanation This material was based on the book Financial Accounting (written by Rick Antle and Stanley J. Garstka, Tsinghua University Press). The students taking this course should have finished learning Fundamental Accounting and Financial Accounting (Chinese version).

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Thank you !