ULM SATURDAY ACADEMY 1/25/2014. What is Accounting? Accounting is the recording, measurement and interpretation of financial information. 2.

ULM SATURDAY ACADEMY

1/25/2014

What is Accounting?

Accounting is the recording, measurement and interpretation of financial information.

2

Why is Accounting Important?

Accounting is important to: Business managers Business owners Investors

Without accounting, they would not be able to determine whether or not a firm is in good financial standing.

3

What is a business transaction?

What are the two main financial statements?

Business Transactions

Mr. Tom DeNardin

1. This is an example text. Go ahead and replace it with your own text. This is an example text. Go ahead and replace it with your own text.

2. This is an example text. Go ahead and replace it with your own text.

3. This is an example text. Go ahead and replace it with your own text.

Business Transaction

1. This is an example text. Go ahead and replace it with your own text. This is an example text. Go ahead and replace it with your own text.

2. This is an example text. Go ahead and replace it with your own text.

3. This is an example text. Go ahead and replace it with your own text.

Business Transaction

1. This is an example text. Go ahead and replace it with your own text. This is an example text. Go ahead and replace it with your own text.

2. This is an example text. Go ahead and replace it with your own text.

3. This is an example text. Go ahead and replace it with your own text.

Business Transaction

for

Business Transaction

Business Transaction

So, What Happens When Apple Sells One iPhone Anywhere in

the World? 10

So, What Happens When Apple Sells One iPhone Anywhere in the

World? 11

Cash

Phone

Phone

Additionally, Apple also had to pay for things like :• Employee salaries and benefits• Utilities• Advertising• Shipping• And hundreds of other expenses

Accountants are in charge of recording all transactions. It does not matter how many or where in the world these transactions

take place!!!

Financial Statements

Income Statement

Balance Sheet

Income

expenses

NetIncome

Assets

Liabilities

Net Worth

Financial Statements

Income Statement

Paid

Income

Financial Statements

Income Statement

Buy things

Expenses

Financial Statements

Income Statement

What is left over

Net Income

Financial Statements

Income Statement

What is left over

Net Income

Buy things

Expenses

Paid Income

Financial Statements

Balance Sheet

What I Own

What I Owe

What I’m Worth

Financial Statements

Balance Sheet

What I Own

Assets

What I Owe

Liabilities

What I’m Worth

Net Worth

Know you income and net worth at all times.

The Balance Sheet20

Assets 2013 2012 Assets are business propertyCash 5 5 Cash that is ready to be usedAccounts Receivable 20 19 These are bills that others owe to youInventories 36 29 Parts or finished products that are stored in the warehouse

Total Current Assets 61 53 Current assets are property that takes less than 1 year to sell

Net Fixed Assets 106 92 Assets that take longer than 1 year to sell (cars, trucks, machinery, buildings)

Total Assets 167 145 The value of all of the property the business owns

Liabilities Liabilities are what the business owes to othersAccounts Payable 26 21 Bills that you owe to others (payable right away)Notes Payable 14 13 Debt that is payable right away (like a credit card that charges interest)

Total Current Liabilities 40 34 Current liabilities are debts and bills that are payable in less than 1 year

Long-Term Debt 57 53 Debt that is payable over a period of longer than 1 yearTotal Liabilities 97 87 Represent the total debt the firm has

Equity Equity is the portion of the business that is owned by the owner(s) of the firmTotal Equity 70 58 The value of the portion of the business that is actually owned by the owner of the business

Total Liabilities and Equity 167 145 This number must always equal the number for Total Assets

The balance sheet compares business property against business debts

The Income Statement21

2013 2012Sales 76 80 Money generated by selling the productCost of Goods Sold (38) (34) Cost of producing the product

Gross Profit 38 46

Other Expenses 10 9 Expenses not related to the production of the productOperating Profits 48 55 The money that is left over after all expenses are paid

From operating profits, the business would have to pay taxes to the government

The income statement compares business revenue against business expenses

Activity22

Look at the raw materials that we have provided for you.Each one of those components has a cost:

Component Cost per unit

Motor 2

Battery 1

Brush 1

Pipe Cleaner 0.5

Rubber Bands 0.5

Googly Eyes 0.5

Glue 0.5

What is the total cost of the materials that you need to assemble a bot?

Activity23

Now you need to figure out what the cost of putting all of those components together into one finished Bristlebot is. We call this the cost of labor. For your company the cost of labor is 50 cents per unit.

So, now that you have considered the cost of labor, what is the cost of putting together a Bristlebot?

The cost of materials and the cost of labor are known as Cost of Goods Sold or COGS.

Activity24

In addition to the cost of assembling each Bristlebot, you need to consider other costs called Administrative Expenses. These expenses include the following:

Building Rent 500

Insurance 100

Salaries 120 Total Administrative

Expenses

These expenses are a little different, because it does not matter whether or not you are producing Bristlebots, the firm MUST pay for them. So, even if your factory is closed, you still have to take care of these expenses. Because of this, we call these expenses Fixed Costs. Also, because these expenses do not change with the amount of Bristlebots you produce, the more you Bristlebots you produce, the smaller these expenses will be per unit produced.

Activity25

Based on what you now know, how much will you charge for each Bristlebot? Once you have determined the pricing and the amount that you need to produce, fill in the form what we have provided for you by following the instructions. Company Name: _____________________________

Income Statement

2013

Sales

Cost of Goods Sold

Gross Profit

Building Rent 500

Insurance 100

Salaries 120 Total Administrative

Expenses

Operating Profits

Did your company generate a profit? If not, produce and sell more Bristlebots and fill in the form again. What happens to profits as you increase sales?