Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. 1 “Those who recognize the value of accounting information and learn how to use it to make better decisions have a competitive advantage over those who don’t.” –Steve Albrecht

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Define purpose of financial accounting Topic organization Major student deliverables & expectations Student resources Learning the basics of the most popular business performance report in existence. 2

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Define accounting purpose 3 1 1

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Accounting is “the language of business.” Financial Accounting is designed to provide information to people who make decisions: Measures business activity in monetary terms Processes the data into reports Communicates the results to decision makers Decisions are made, and the process repeats 4 Business Activity Measures & processes Financial Reports Decision Making

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. 5 Internal Users Their uses? External Users Their uses? Kenneth I. Chenault

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Financial Accounting Provides information for external decision makers Past performance Financial standing Reporting the past Managerial Accounting Focuses on information for internal decision makers Performance planning Resource allocation Creating the future 6

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 To really know how to read accounting information, we need to know how it is prepared.  It takes practice to learn the mechanical processes of accounting.  It takes even more work to understand it, communicate it, and use it in making decisions.  The payoff is your competitive advantage which you will hold for the rest of your life

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Topic Organization 9 2

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. 10 The fundamentals The accounting cycle 1/3 of the class. Reporting core business activities – sales, etc Reporting & safeguarding business possessions Reporting amounts that the business owes Reporting owners’ equity & related transactions Reporting cash flows Reading the story You as the analyst

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Major Student Deliverables & Expectations 11 3

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. 12 Homework – due on time Read chapter & homework before lecture Homework is submitted online Practice Set links chapters 1 through 4 Quizzes In-class early in semester, must be here for the points Mid terms and final exam 1 st the accounting cycle 2 nd covers the following 1/3 of the class Final, covers last section of class and is comprehensive Analysis cases Analysis of financial statements and decision making Tied to the topics of study at hand In class work Opportunities will arise for work time in class leading to direct points and/or participation points. Attendance is required to earn these points.

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Study progress, and topic progression Class preparation & participation Timeliness Responsibility Plagiarism, cheating, ethics Etiquette 13

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Student Resources 14 4

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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Your instructor Office hours 9:00am, 10:00am works great too! Call Your peers Get the “how to”, not just the “what is” Find people who match your style & schedule The internet Class website, YouTube, Accounting sites galore Your book & 16

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Using your book Use it, a lot Read it before class Learning objectives, review before reading Summary problems, pause for review Demo Doc, detailed demonstrations Vocabulary, know all of it Homework: Short, Exercises, Problems, More ‘ Homework, practice, feedback, help, more 17

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. “New from accounting, sir. Two and two is four again.”

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Analytical skills -- To prepare and analyze financial data, identify and explain discrepancies and variations. Teamwork -- To work effectively with team members and clients to complete projects and build relationships. Communication -- To interact with clients to discuss issues and obtain and share information in a professional manner. Organization/time management -- To prioritize and juggle various tasks, and to identify and manage time constraints. Flexibility -- To adapt to changing clients, schedules and working hours.

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. The most popular business performance report in existence. 20 5

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. 21 Retained earnings + Net income (loss) - Dividends + Revenues - Expenses Businesses create wealth by selling goods & services to customers for more than the cost to provide those goods & services. Buy ice cream sandwiches for 50¢, sell for $1.00 Hire a mechanic for $30/hour, bill at $90/hour Hire programmers for $50/hour, and rake in $1.2Billion to advertise on your site.

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Amounts earned by delivering goods or services to customers Sales revenue Service revenue Revenue Sales Or any similar terms used to convey the concept of supplying goods or services Aka “The Top Line” 22

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Decrease in equity that occurs from using assets or increasing liabilities in the course of delivering goods or services to customers The cost of the merchandise that was sold Store or rent expense Salary expense Advertising expense Utilities expense Interest expense Property tax expense 23

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Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Shout out a company about which you care Help read and analyze their income statement Judge a few companies based solely on their I.S. Who is doing well? Fair? Poorly? 25

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Mastering the basics of the income statement Pair up Blind drill to master Switch Repeat Content: Header Three body items: Category labels Definitions Mathematical relationship Date formatting? Label? Math relationship?

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Read all of chapter 1 before class. You review key terms. You familiarize yourself with the assignments Lecture covers chapter 1 content We Review the income statement We hammer on the balance sheet We work with profitability and financial standing Another quiz likely

Copyright © 2012 Pearson Education, Inc. Publishing as Prentice Hall. Write out an income statement template as follows: Main title, including proper time frame characteristics List the three main categories on an income statement. Describe each in terms that have meaning to you. Show their mathematical relationship.