1 © copyrright doug hillman 1997 accounting information system

1© Copyrright Doug Hillman 1997

Accounting Information

System


Major Accounting Bodies

American Institute of Certified Public Accountants

Financial Accounting Standards Board Government Accounting Standards

Board Securities and Exchange Commission


Ethics

The process that individuals use


Ethics

The process that individuals use to evaluate their conduct


Ethics

The process that individuals use to evaluate their conduct in light of moral principles and values


Assets

Anything of value held by an organization

Assets have


Assets


Assets have

» Potential usefulness


Assets


Assets have


» Future usefulness


Assets


Assets have


» Future usefulness

» Economic Value


Assets

Cost principle Going-concern concept Objectivity principle Stable dollar concept


Equities

Claims against the total assets of an organization

Liabilities

» Claims of nonowners Owner's Equity

» Claims of owners


Retained Earnings

Cumulative total of net income, net loss, and dividends since start of business


Revenues

Inflows of assets that result from performing services or selling goods

Revenues are realized when

» the service is performed or


Revenues

Inflows of assets that result from performing services or selling goods

Revenues are realized when

» the service is performed or

» the goods are delivered


Expenses

Outflows of assets or incurrence of liabilities while earning revenues

A business incurrs expenses to earn revenues


The Accounting Equation

Things of Value = Claims Assets = Equities Assets = Liabilities + Owner's Equity Assets - Liabilities = Net Assets


Analyzing Transactions

Use accounting equation Is there a change in assets?

» Which asset?

» How much was the change? Is there another change in assets?


Analyzing Transactions

Is there a change in liabilities?

» Which liability?

» How much was the change? Is there another change in liabilities? Is there a change in owners’ equity?

» How much was the change?


Four Basic Financial Statements

Income Statement Statement of Owners’ Equity Classified Balance Sheet Statement of Cash Flows


Income Statement

Reports changes in owners’ equity from operating activities

Revenues - Expenses = Net Income(Loss)


Statement of Owners’ Equity

Changes in owners’ interest in assets Issuances of new stock Retained earnings

» Net income or loss

» Dividends


Classified Balance Sheet

Classification - arrangement of financial statement items into groupings that have common basis

Assets

» Current

» Property, plant, and equipment


Classified Balance Sheet

Liabilities

» Current

» Long-tern Owners’ Equity

» Common stock

» Retained earnings


Statement of Cash Flows

Reports cash flows during period Categories of activities

» Operating activities

» Investing activities

» Financing activities


Analyzing Information


Balance Sheet Analysis

Are total assets higher or lower? What is percent change in total assets? Is the percent of total liabilities to total

liabilities plus owner’s equity increasing or decreasing?


Income Statement Analysis

Are revenues higher or lower? What is the precentage change in total

revenues? Is the percentage of total expenses to

total revenues increasing or decreasing?


Integrative Analysis

Is the business operating efficiently by using the least amount of asset investment to generate a given level of total revenues?

Calculate Total Asset Turnover

» Total revenues

» divided by

» Average total assets

1 © copyrright doug hillman 1997 accounting information system

Documents

copyrright doug hillman

net assets slide

assets liabilities

business slide

conduct slide

total assets

inflows of assets

outflows of assets