1 Introduction Introduction To Accounting 2 Introduction Performance Objectives: 1. Define accounting 2. Explain the importance of accounting information.

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IntroductionIntroduction

Introduction To AccountingIntroduction To Accounting

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IntroductionIntroduction

Performance Objectives:Performance Objectives:

1.1. Define accountingDefine accounting

2.2. Explain the importance of Explain the importance of accounting informationaccounting information

3.3. Describe the various career Describe the various career opportunities in accountingopportunities in accounting

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Why do we want to learn Why do we want to learn Accounting?Accounting?

Language of BusinessLanguage of Business

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Definition of AccountingDefinition of Accounting

Keep track of receiptsKeep track of receipts Revenue or dollars inRevenue or dollars in Expenses or dollars outExpenses or dollars out

Keep track of debtKeep track of debt Keep track of investmentsKeep track of investments Keep track of assets (stuff you own)Keep track of assets (stuff you own) Calculate profit (earnings)Calculate profit (earnings) Cash FlowCash Flow

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Define AccountingDefine Accounting

AccountingAccounting The process of analyzing, classifying, The process of analyzing, classifying,

recording, summarizing, and recording, summarizing, and interpreting business transactions in interpreting business transactions in financial or monetary terms; sometimes financial or monetary terms; sometimes mistakenly called bookkeepingmistakenly called bookkeeping

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Process of analyzing, classifying, Process of analyzing, classifying, recording, summarizing, and recording, summarizing, and

interpreting business transactions in interpreting business transactions in financial or monetary termsfinancial or monetary terms

Define: Business Define: Business Transactions (page Transactions (page 1)1)

A business A business transaction is an transaction is an event that has a event that has a direct effect on the direct effect on the operation of an operation of an economic unit, is economic unit, is expressed in terms expressed in terms of money, and is of money, and is recordedrecorded

Examples of Examples of Economic Unit:Economic Unit: Business EntityBusiness Entity Sole Sole

ProprietorshipProprietorship CorporationCorporation CollegeCollege Government Government

AgenciesAgencies ChurchesChurches ClubsClubs

Common terms:Common terms: FirmFirm CompanyCompany

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Analyzing?Analyzing? Look at receiptsLook at receipts Look at loan documentsLook at loan documents Etc….Etc….

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Classifying?Classifying? Is it cash in?Is it cash in? Is it cash out?Is it cash out? Is it an expense?Is it an expense? Is it debt?Is it debt? Etc….Etc….

Classifying?Classifying? AssetAsset

Things you ownThings you own LiabilityLiability

DebtDebt Owners’ EquityOwners’ Equity

Assets - LiabilitiesAssets - Liabilities

Loose D

efi

nitio

ns

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Recording?Recording? Write it downWrite it down Etc….Etc….

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Summarizing?Summarizing? Add it upAdd it up Create a reportCreate a report Etc….Etc….

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Interpreting?Interpreting? Look at reports and make decisionsLook at reports and make decisions Etc….Etc….

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Process of analyzing, Process of analyzing, classifying, recording, classifying, recording,

summarizing, and interpreting summarizing, and interpreting business transactions in business transactions in

financial or monetary termsfinancial or monetary terms

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DefinitionsDefinitions

Generally accepted accounting Generally accepted accounting principles (GAAP)principles (GAAP) The rules or guidelines used for carrying The rules or guidelines used for carrying

out the accounting processout the accounting process

Who creates the rules?Who creates the rules? Voters Voters Congress Congress SEC SEC PCAOB PCAOB

FASB FASB GAAP GAAP Congress (107Congress (107thth)) PCAOB PCAOB

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DefinitionsDefinitions

There is not an exact distinction There is not an exact distinction between bookkeeping & accountingbetween bookkeeping & accounting

In General:In General: BookkeepingBookkeeping

Systematic recording of business Systematic recording of business transactions in financial termstransactions in financial terms

AccountingAccounting Create accounting system, audit accounting Create accounting system, audit accounting

system, or create official reportssystem, or create official reports

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Purpose of AccountingPurpose of Accounting

To provide useful information to To provide useful information to people who make business decisionspeople who make business decisions

Who makes business decisions?Who makes business decisions? Users of Accounting Information:Users of Accounting Information:

Owners/InvestorsOwners/Investors ManagersManagers CreditorsCreditors Government AgenciesGovernment Agencies

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OwnersOwners

Owners have invested their money or Owners have invested their money or goods in a business organizationgoods in a business organization

Owners desire information regarding:Owners desire information regarding: Company’s earningsCompany’s earnings Prospects for future earningsProspects for future earnings Company’s ability to pay debtsCompany’s ability to pay debts

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ManagersManagers

Managers must know the language of Managers must know the language of business so that they can manage business so that they can manage the economic unitthe economic unit

Managers use or create accounting Managers use or create accounting information in order to:information in order to: Prepare financial reportsPrepare financial reports Understand reports and budgetsUnderstand reports and budgets Express future plans in financial termsExpress future plans in financial terms

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CreditorsCreditors Creditors lend money or extend Creditors lend money or extend

credit to the companycredit to the company Creditors look at accounting Creditors look at accounting

information to assess the company’s information to assess the company’s ability to pay its debtsability to pay its debts

Examples of creditors:Examples of creditors: BanksBanks SuppliersSuppliers Lending InstitutionsLending Institutions

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Government AgenciesGovernment Agencies

Taxing authorities must verify Taxing authorities must verify information submitted by companiesinformation submitted by companies Examples of taxes:Examples of taxes:

Income taxesIncome taxes Sales taxesSales taxes Employment taxesEmployment taxes

Public companies must submit the Public companies must submit the correct reports to regulatory agenciescorrect reports to regulatory agencies

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Career Opportunities In Career Opportunities In AccountingAccounting

Accounting Clerk/TechnicianAccounting Clerk/Technician BookkeeperBookkeeper Paraprofessional AccountantParaprofessional Accountant AccountantAccountant

CPACPA Managerial/PrivateManagerial/Private Not-for-profitNot-for-profit

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Accounting Clerk/TechnicianAccounting Clerk/Technician Routine recording of financial informationRoutine recording of financial information Generally, accounting clerks work with Generally, accounting clerks work with

one part of the accounting system such one part of the accounting system such as:as: Accounts ReceivableAccounts Receivable Accounts PayableAccounts Payable PayrollPayroll

Minimum requirements:Minimum requirements: One semester of an accounting course (book)One semester of an accounting course (book) Reality 2004: (1 – 2 year accounting certificate)Reality 2004: (1 – 2 year accounting certificate)

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BookkeeperBookkeeper

Supervises accounting clerks or Supervises accounting clerks or accounting system in small- to accounting system in small- to medium-sized companymedium-sized company

Minimum requirements:Minimum requirements: One to two years of accounting as well One to two years of accounting as well

as experience as an accounting clerkas experience as an accounting clerk

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Paraprofessional AccountantParaprofessional Accountant

In-between a bookkeeper & an In-between a bookkeeper & an accountantaccountant

A person who is qualified in A person who is qualified in accounting to assume the duties of a accounting to assume the duties of a general bookkeeper as well as some general bookkeeper as well as some of those of a professional accountant of those of a professional accountant under that accountant’s supervision under that accountant’s supervision

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AccountantAccountant

CPA (Certified Public Accountant)CPA (Certified Public Accountant) Design and audit accounting systemsDesign and audit accounting systems Provide financial advice about business Provide financial advice about business

operationsoperations Prepare tax returnsPrepare tax returns

Minimum Requirements:Minimum Requirements: College degree (150 units – 5 years of college)College degree (150 units – 5 years of college) Pass CPA examPass CPA exam Accounting experienceAccounting experience

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AccountantAccountant

Managerial/PrivateManagerial/Private Manage and create Manage and create

accounting systemaccounting system Prepare budgetsPrepare budgets Determine costsDetermine costs Prepare financial Prepare financial

reportsreports

Not-for-profitNot-for-profit Accountants that Accountants that

work for business work for business entities such as:entities such as:

Government Government agenciesagencies

HospitalsHospitals ChurchesChurches SchoolsSchools

1 Introduction Introduction To Accounting 2 Introduction Performance Objectives: 1. Define accounting 2. Explain the importance of accounting information.

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