1. Session 2 The Recording Process and Mechanics
FINANCIAL ACTG. - BUS Spring 2015

2. Competencies by Session 3
What are the primary financial statements in the F/S Package?
What are their uses?
What are the other key components of the F/S Package?
Describe the Financial Accounting Model.
What is the accounting equation?
Relate it to the Balance Sheet.
Relate it to the Income Statement.
What is Statement of Financial Accounting Concepts #1 (SFAC #1)?
What are the financial accounting assumptions?
What are the financial accounting principles?
FINANCIAL ACTG. - BUS Spring 2015

3. Historical Cost versus Relevant Information
What is NOT on the balance sheet.
Land at current value.
Intellectual property.
Off-balance sheet liabilities
Measurement bias
Management bias
FINANCIAL ACTG. - BUS Spring 2015

4. Two Other Factors Materiality Conservatism
FINANCIAL ACTG. - BUS Spring 2015

5. Transactions External events Internal events
“...a measurable exchange or change in value, generally recorded AFTER the fact.”
FINANCIAL ACTG. - BUS Spring 2015

6. Key Accounts Assets Liabilities Equity Revenues Expenses
FINANCIAL ACTG. - BUS Spring 2015

7. Measuring Transactions-The Basics
At least two account
The integrity of the accounting equation
Debits (left-side entries) = Credits (right-side entries
FINANCIAL ACTG. - BUS Spring 2015

8. Measuring Transactions-Methodology
Determine the accounts
Determine the direction of the exchange
Determine the amounts
Note pages very carefully
FINANCIAL ACTG. - BUS Spring 2015

9. The “T-Account” ASSETS & EXPENSES LIABILITIES, EQUITY & REVENUES
Debit Credit Debit Credit
FINANCIAL ACTG. - BUS Spring 2015

10. Accounting (Bookkeeping) Cycle-modified
Analyze Transaction
Record and Post
Summarize Accounts
Unadjusted Trial Balance
Adjusting Journal Entries (AJE’s)
Adjusted Trial Balance
Prepare Income Statement
Closing Entries
Final Trial Balance
Prepare Balance Sheet, SCF and SSE
FINANCIAL ACTG. - BUS Spring 2015

11. Close Worksheet
FINANCIAL ACTG. - BUS Spring 2015

12. Financial Statement Preparation
Headings are IMPORTANT
Company, Title and Date
Note how the T-Account balances track to the actual financial statements
FINANCIAL ACTG. - BUS Spring 2015

13. Financial Statement Relationships
Balance Sheet
Income Statement
Statement of Cash Flows
Stmt of Sharehldrs Eq.
Current
Assets
Non-
current
Current
Liabilities
Long-
term
Debt
Equity
Revenue
Cost of Goods
Sold (COGS)
Gross Margin
Operating Exps.
Net Income
Operating Cash
Investing Cash
Financing Cash
Change in Cash
Beginning Cash
Ending Cash
Beginning S/E
Net Income
Less: Dividends
Ending S/E
FINANCIAL ACTG. - BUS Spring 2015

14. Adjusting Journal Entries
Accruals
Prepayments
Deferrrals
Cost Expirations
FINANCIAL ACTG. - BUS Spring 2015