1. 1-1 贾建军 Jia Jian Jun 贾建军 Jia Jian Jun jjj7108@hotmail.com Accounting

2. 1-2 The Role of Accounting in Business Chapter 1

3. 1-3 1.Describe the types and forms of businesses, business strategies, value chains, and stakeholders. 2.Describe the three business activities of financing, investing, and operating. 3.Define accounting and explain its role in business. 4.Describe and illustrate the basic financial statements and how they interrelate. 5.Describe eight basic accounting concepts underlying financial reporting. 6.Describe and illustrate the use of horizontal analysis to analyze and evaluate a company’s performance. Learning Objectives After studying this chapter, you should be able to:

4. 1-4 1 Learning Objective Describe the types and forms of businesses, business strategies, value chains, and stakeholders.

5. 1-5 Product Product General MotorsAutomobiles, trucks, vans General MillsBreakfast cereals BoeingJet aircraft NikeAthletic shoes Coca-ColaBeverages SonyStereos, televisions, radios General MotorsAutomobiles, trucks, vans General MillsBreakfast cereals BoeingJet aircraft NikeAthletic shoes Coca-ColaBeverages SonyStereos, televisions, radios Manufacturing Business` Types of Businesses

6. 1-6 Merchandising Business Product Product Wal-MartGeneral merchandise Toys”R”UsToys Barnes & NobleBooks Best BuyConsumer electronics Amazon. ComBooks Types of Businesses

7. 1-7 Product Product DisneyEntertainment Delta Air LinesTransportation Marriott HotelsHospitality and lodging Merrill LynchFinancial advice SprintTelecommunication DisneyEntertainment Delta Air LinesTransportation Marriott HotelsHospitality and lodging Merrill LynchFinancial advice SprintTelecommunication Service Business Types of Businesses

8. 1-8 There are three forms of business organizations Proprietorship Partnership Corporation

9. 1-9 A proprietorship is owned by one individual. Advantages Ease in organizing Low cost of organizing Disadvantage Limited source of financial resources Unlimited liability Doug’s

10. 1-10 A partnership is owned two or more individuals. Advantages More financial resources than a proprietorship. Additional management skills. Disadvantage Unlimited liability. Doug and Max’s

11. 1-11 A corporation is organized under state or federal statutes as a separate legal entity. Advantage The ability to obtain large amounts of resources issuing stocks. Disadvantage Double taxation. D & M Inc.

12. Business Stakeholders and Accounting Information Users Business 政府 Government 社会公众 Public 管理人员 Managers 员工 Employees 竞争对手 Competitors 客户 Customers 供应商 Suppliers 债权人 Creditors 所有者 owners

13. 1-13 STAKEHOLDERS Internal: Stockholders Managers Employees External: Suppliers Customers Stockholders Business Stakeholders

14. 1-14 Business Stakeholders Interest in the Business Examples Capital market Providers of majorBanks, owners, stakeholderfinancing for the stockholders business Product or service Buyers of products Customers and market stakeholdersor services and vendorssuppliers to the business Government Collectors of taxes and Federal, state, and stakeholderfees from the business city governments and its employees Internal stakeholders Individuals employed Employees and by the businessmanagers

15. 1-15 Revenues - Expenses = Net Income Revenues - Expenses = Net Income Operating Activities = Net Loss

16. 1-16 Define accounting and its role in business. 3 Learning Objective

17. 1-17 What is accounting? Accounting is an information system that provides reports to stakeholders about the economic activities and condition of a business.

18. 1-18 Major objectives of financial accounting 1.To report the financial condition of a business at a point in time. 2.To report changes in the financial condition of a business over a period of time.

19. 1-19 Describe and illustrate the basic financial statements and how they interrelate. 4 Learning Objective

20. 1-20 Income Statement An income statement is a summary of the revenue and the expenses for a specific period of time. Objective:Objective: Reports change in financial condition

21. 1-21 Revenues - Expenses = Net Income Revenues - Expenses = Net Income Accounting Equition ： incomestatement = Net Loss

22. 1-22 Income Statement Hershey Foods Corporation Income Statement For the Year Ended December 31, 2001 (in thousands) Revenues: Sales$4,557,241 Expenses: Cost of sales$2,665,566 Selling and administrative1,269,964 Other expenses209,077 Interest69,093 Income taxes 136,385 4,350,085 Net income$ 207,156 EX 1-10 Note that the time period for the statement is in the heading.

23. 1-23 Retained Earnings Statement The retained earnings statement reports changes in financial condition due to changes in retained earnings. Objective:Objective: Reports change in financial condition

24. 1-24 Retained Earnings Statement Hershey Foods Corporation Retained Earnings Statement For the Year Ended December 31, 2001 (in thousands) Retained earnings, January 1, 2001$2,702,927 Add net income$207,156 Less dividends 154,750 Increase in retained earnings 52,406 Retained earnings, December 31, 2001$2,755,333 From the income statement Again, note the time period

25. 1-25 Balance Sheet The balance sheet reports the financial condition as of a point in time. Objective:Objective: Reports financial condition

26. 1-26 Balance Sheet Assets = (Claims) Rights to the Assets

27. 1-27 Balance Sheet Assets = Liabilities Stock- holders’ Equity + The rights of creditors The rights of the stockholders The Accounting Equation

28. 1-28 Balance Sheet Hershey Foods Corporation Balance Sheet December 31, 2001 (in thousands) Assets Cash$ 134,147 Accounts receivable361,726 Inventories512,134 Prepaid expenses62,595 Property, plant, and equipment1,534,901 Intangibles429,128 Other assets 212,799 Total assets$3,247,430 ContinuedContinued Note that the date is a specific point in time

29. 1-29 Liabilities Accounts payable$ 133,049 Accrued liabilities462,901 Notes and other debt1,245,939 Income taxes 258,337 Total liabilities$2,100,226 Stockholders’ Equity Capital stock$ 183,213 Retained earnings2,755,333 Repurchased stock and other equity items (1,791,342) Total stockholders’ equity$1,147,204 Total liabilities and stockholders’ equity$3,247,430 Matches total assets

30. 1-30 Statement of Cash Flows The statement of cash flows reports the changes in financial condition due to the changes in cash during a period. Objective:Objective: Reports change in financial condition

31. 1-31 2 Learning Objective Describe the three business activities of financing, investing, and operating.

32. 1-32 Financing Activities Financing activities involve obtaining funds to begin and operate a business.

33. 1-33 Financing Activities Businesses seek financing by: borrowing issuing shares of ownership

34. 1-34 Financing Activities A liability is a legal obligation to repay the amount borrowed according to the terms of the borrowing agreement.

35. 1-35 Financing Activities Samples of Liabilities Accounts payable: When a business buys a service or product on credit. Bonds payable: When a business borrows money by issuing bonds. Interest payable: Any interest that is due on a note or a bond. Note payable: When a business issues commercial paper or borrows on a line of credit.

36. 1-36 Financing Activities A business may also finance its operations by issuing shares of stock. The basic type of stock is called common stock.

37. 1-37 Investing Activities Investing activities involve the selection and management of long-term resources that will be used to develop, produce, and sell goods and services.

38. 1-38 Investing Activities Assets are resources that the business owns or are otherwise under its legal control and available for use in the future. What are assets?

39. 1-39 Investing Activities When the business sells merchandise or services to a customer, the right to collect is an account receivable.

40. 1-40 Operating Activities Revenue is the increase in assets from selling products or services. Revenue is often identified according to its source, such as Rent Revenue. What is revenue?

41. 1-41 Operating Activities An expense is a decrease in assets or an increase in liabilities from producing and delivering goods or providing services that constitute the primary operating activities of an organization. What is an expense? EX1-7 ； EX1-8 What is an expense? EX1-7 ； EX1-8

42. 1-42 Statement of Cash Flows Three categories on the statement of cash flow are: 1.Operating activities 2.Investing activities 3.Financing activities

43. 1-43 Hershey Foods Corporation Statement of Cash Flows For the Year Ended December 31, 2001 (in thousands) Net cash flows from operating activities$ 706,405 Cash flows from investing activities: Investments in property, plant, and equipment$(187,029) Proceeds from sale of property, plant, and equipment 63,042 Net cash flows used in investing activities$(123,987) Cash flows from financing activities: Cash receipts from financing activities, including debt$ 30,589 Dividends paid to stockholders(154,750) Repurchase of stock(40,322) Other, including repayment of debt (315,757) Net cash flows used in financing activities$(480,240) Net increase in cash during 2001$ 102,178 Cash as of January 1, 2001 31,969 Cash as of December 31, 2001$ 134,147 Note the time period 1-46

44. 1-44 Financial History of a Business DEC. 31 2003 Balance Sheet Dec. 31, 2003 Income statement for the year ended December 31, 2003 Next slide

45. 1-45 Financial History of a Business DEC. 31 2004 Balance Sheet Dec. 31, 2004 Income statement for the year ended December 31, 2004 Next slide

46. 1-46 Financial History of a Business DEC. 31 2005 Balance Sheet Dec. 31, 2005 Income statement for the year ended December 31, 2005

47. 1-47 The End Chapter 1