Accounting in Acton r a ee S& Accounting ° i 0 . . ; Accounting is the process of identifying, recording . . . an & communicating the economi events oF Organization to +e intenestedl usens of information. ba. Identity >A company selects the econornic event | relevant +o it business, [2 Recomd > A company records classifies Se summarizes economic events 4p ee a Fistony of it Pmancial vities, | 3+ Cornmuncate > A Company bree a annual ine /Finanelab reepor+ to communicate with Wintenested usens of information, Importance of Accounting ¢ a ‘4. Keeps systemate neconds, ZR Protects business Properties, 3. Ascendain openational PreFit on loss, 4. Ascentein Hnancal position of business,N xo) An economic event is & snangacten that As Cemtacad) mecognized an the Fmancial statements of an accounding entity » comfy ) \ | | | ; | Carne cama outa involvement 2% ODI? economic event) | Types of Econamnic Event = | Types oF Genomic: Evert | 4. feternal Event 2 Is an economic event which pene oceuns. between an ertity k Mr envinenment, Example? sale of goods to dustomens Payment of = vmonthly rent to the landlenL Rendening of services to customens Punchas of naw materials from othen enterpnisé, 2 Internal fvent>T+ is an economic event whic, occuns within am enhty, . Example! Supply of naw materials by the stones department +o tHe wanubteduning depant ment, @® Difference between Accounting &_ Beokkeeping * at [ee ceauerenn ___Baokkeaying }) Identifying , neconding | 1) Reeonding of econemic % communicating of events | oonamic evend, . | I) Final stage of accounting | 1) Primany sage of accounting Process, 7 process, y "Used by both exlennal Qo | W Used by intemal wse75 | + ennaInterested Users of Accounting Infonmation’ . 2: Externak Usens > External usens ane individuals RK onganteations outtide a company ahs want Financial: information ‘of the company, r+ has 2tyes Example ¢ Lendeng, sRaneboldent, Govennmne extemal auditons ete, U Dotemnal Users. trtennal wens’ ane individuals Cenedi-tons thvesaal nts Cussdowrer(, inside a company who planjonganize So run the busmess, Exanple : Managens, OF Ficens, zwternal auditon Sales stotF Budget officens etc, Building Blocks of Accounting : Ethics on Financial Reporting Building Blocks oF Accounting . Gererall Accepted Accourrtin Principles CaAapP ASS upton| Ethics in Financial Reporting | | ——>_ 1+ Ethics ane +he shrindand’s of conduct by which ones acthore ane judge A as right on wrong, forest on disowe st, fain on not -fain, 2) Effective financial reporting depends an sound ethical bebavion, 3, Recent Financial Seandals at Ennom, Wend Comm Healthfouth , Alc ete companies reduces +he confidence of anvestors, 4+ In onden +o reduce such unethical conponake bebevien 9. decrease tw chance oF these scandals Congress passed the Sanbawes-Oxley Act (sox) “ Generally Accepted) Accourrting Principles Coaap)# Definition > standards thet ane gerenally accepted Ge universally Practiced pane called generally accepted accounting privcdple. It indicates Paw to repent ecanemic events , & i) Financial Accounting Stendands Boand CFASB) W seeunties & Exchange Commission (sc 1) “Teteronedho ri Accounting Standands Boand (1438 )ae Principles > ae tee ) Principle of Regularity (@AAPcomp lant acwouwknty SdnicHy adPere +o established mules x» regulations ) N) Principle of consistency Ceavsi shemt Standand ¢ ane applied thnoughout the Financial nepentina process I) Principle of since nity (Garp -cowpliant accountant ane committed ty aceunacy & twopantiadity, 1) Principle of Permanente af methods] (Con5is te wt proceduges ane used dn +he preparation. of al/ Financial re portes ) v) Preinciple of non= compensation Call aspects oF an. orgamization’s performance, whelten positive art vegative ane Fully reported With no Prospect of debt compensation) 1) Principle of [prudence (Sreculastion does not influence the data of Financial report) Nn) Principle of |eondt nuiby CAsset valuatovyg Assume the. Operation of the organization til! continue ) vi) Principle of period city C Reporting oF mavenuss is divided by Standard accounting Hye Periods \x) Principle of mectemiali ty] C Financial reports Bully d the. onganization’s mevetany Stuaton %) Principle of utmost good saith] Call tweived panches ane assumed ty be acting Fo vestly ) isclose2 eo Assump-Hons ° Assumptions provide a Foundation Bfor He Accounding Process, 4. Monedany Umit Assumptorn. => d_ pr i )) = states that qa company auel” neconds ity thak can be epresse business transactions iv terms oF money's C Dellan, aka ete ) ny) I+ enables accounting te yneasune economic event | m) It is Vidal +o applying the east principle, \W)Tt prevent the anclugien of eee relevant trforymation (Hehlth of company’s eure, quality oF Senvice , monale oF employees etc) in the Atcon biting Reconds, ) x states that a business endityrs transaction should be keep sepanate Stem these of the owes Cowner 22 personal ceaTcasr Se, ay Trangagchen a . include wal rane cy) W Tk also states that the Financial recarrels oF ee oF the divisions should be kepd S€panately, Fon’ example, IF a company mus two business divisions (Hotel Ban % Rocdavina red chain) sepanate accournds nad +o be maintained Fan ° each division, { tanta ore TRALatLe WMT armngrea TH Or ata]W 4. Propniertorsbup > ETE ) Owned. by one penson, 1) Need small amount of worey to stant business, 1) All profits % debtr ane only be lengs +o ore penson, Wy) Example! Aut nepain sbops, Beauly Salons Fanms Antique shops vtlething stones ete, 2. Parcne rts bap ° Oo ) owned by two on mone parsons, ) Has 2 forms — Gerenal (All partnens fave unlimited Hiabillty) 9 Limited Core’ pantren fas fabi lidy liewited to his on Con Investment while at leash one ether pandren Bas full ey) wi)" Paretnereship agreement" sets each pandneri’s investment 2 rele im +he company, ogee paleo GIIMe neki! a1 B semice “tyre besiveses nC bawvyens doetons architect: ete) ie eee gd D ownenship divided inde shane oft stock, | 0) Stockboldons enjoy limited Tia bility Cro Personally liable Pon the debs) w) ownencbip can be transferred at ayy Hey,é B asic Account She Accounting Equation ; Asset = Liabilities + ownen’s Bguity Expanded Accounting Equation | Assets = Liabilities + Cownen’s capital - SLE Drawings + Revenues — Expenses ) Assets t 4) Regounces a busmess owns, 2 Provide fetute senvice¢ on benefit 3: Example ; Cash, Supplies Equipment, Accounts Receivable , Liabilities } \b x8 4. Debt owed by a company 2. Claims against agsets, 3. Example: Accounts Payable, Netes Payable D Accounts Payable > short term obligation which is used to record purchases from suppliens on credit Example, Purchase supplies on credit Dretes Payable > Short on long term abligaction whene a bonnowen neconds a written promise +o. repay. the lenders, Example} Bonnows money -from bank NW) Salonies Payable—> wstowlem ser egs pr Fixed cewa apzr Boot prea 9 TO are, mages Payable — Daily Basis 9 OF GOR GY By oY GR onax\b | Trangactons ane business’ economk events Oumen's Equity [Residual Equity ¢ 4. Ownership. claim on total asserts (Asets-Liabilied 2: Examples Owner capital, Ownens Anauings Revenues, Expenses D owmens Capital > Assets the owner puts indy the business « ‘ ) Revenues > Income that a businers bas trom its nonmal business activities, Common sources of revenuss ane- sales senvices, Fees, Ineere sty Commissions dividends , reyalHes %& ment, Nn) Qumen’s drawings > cash em othen assetr that withdnaws by a swnen fon personal use, 1y) Expenses > Money spent by & business to gerenate mevenugs, Cammen sources oF expenses ane sgalanies & wages expense, nent expense, advertising expense, Utlites expense, ete, tax expense “TransacHons * reconded by accountants, Each tnansach ey hag a ‘dual effect on the aceounting eeuartion, D External Transactons —> reranifas -aideg (aga fuera fist: oe ’ “cancer fate ar GBA supplier Oz sntennal ernal Tansac tors > comaniaa CHGS Sere fabs -teneae Fey waren GATT LT, Caen: Buy abrie fm tng StedFinanel al Statements ° 4. Income Statement D Treludes lists of resources the company fas earned or dispersed during a period of Hye. N) bhows net income (chen nevenues) expenses) Bon net loss Cvthen nevenues < expenses ) N) Represents companyre Performance , ZR Ownen's Equity Scatement—> i) Presents the changes in owrenrs eit Pana Specific period of hme, \) Ownen’s capital is Mcneased by owneny im vesttwend % income, and decreased by, dnawingy Lithdrawals) , 3 Balance Sheet »(Fénancial Position statement) ) Reports the assets, abilities & ownenrs equide ad Specific date, vy Snapshet -oF companyis nancial condition at a specitic ime, | Wi) Represents company’s positions, 4 Cash Flow Statement — ee ) Reports the cash generated & usedt duting a Speaitic pentod of -fwe, W) Measures “Pow well 2 company wmanase i dy } cash potion,Transaction Analysis ° E] Transaction made by Vinynani & Co. Fon the month of August ame shown below 7 ) The. owner invested $25 000 cash an the business, » “he company purchased fre of of Fice equip rent on cnedi+, 1) ‘The company necewed $ Fox cask: in exchange’ Jor senvices perforwed . IY) The company paih ge5o for this ynonth’s nent, V) Tre amen withdnars $100 cask orn perrsonall use, Prepane a tabulan amalysic which Show, the ePheet of these dmansaction aon the expanded) accounting equation, dd—e - — ostsc $ ostse $ | 2208 | 0001-| anosz Q00k O00k ° OSIIE | |PteL | - r t——4 4} | o00/- 00} - s | _—| 44 a = - oss- re b |__| ——} —— | ano, 5 : 00028 c | "8 | | { 4 | | O00 oook { | % | o00sz| | | 9c0sz | oF a | | oe [scomvisa| garidey| |, 219>eg PIF enia7zed | ten Sasuadzg | Smuar2y¥ | saiaamng | Suaamo| | = [penemea |fauddns | tpunovy ‘s°P> Loy rosso Apmba faaamo |_| Spassy 7[2] on ane, 2016 SQ knitting Ltd Bas completed | be Pllowing dnangactien dung He mont, — | D Received bank loan of Tk. 5000, ) purchased office supplies of Tk 200 som ABC Co, Ltd. MW) Paid Tk. 500 cask fon employee Salany, \v) Paid TK. 220 cash Bank loan payrrent, ) ov) Received Tk. 900 cash by salling sind vl) Bornowed Tk. 2500 cask from XYE | Company Ltd, Vu) selling T-s@int of TK. 1900 on accaunk. | | | | Prepare a tabular summany oF the tnansactors | B statement of compre hensiv @ Anco CIncome statement) me i | & statement of change in eauity . i | io Cownens equity statewent)L O096 ¢$ = 0096 + = Qos— Qnsz ° 3° | vay 05% | ° oom | O06l | cost wets | ane 1 | Ooel + r —} 7 —— — 4|—— — | | aosz oosz | 9 | —. — _ ms [eeu | -|) woe : y 2 |S i coz {ee [4 |? | eog— oog- c r oo% eot-| = | o00S | 2005 Tt at Bjqwaierag SGueneud | yariso7 alquarg | aqvied Pes . $95 wadng | Tonuane¥y | surg | smmama a Fa+ent |panovy| _ |pondrita | Sayjddns puree se? ene Rpmea summo sarqery | | spssSQ kritting Ltd Tncome Stclement For the month ended Jun 30,2014 Revenues Service Revenue $ 2800 Expense ¢ Salaries wages expense (00) Net Income $2300 ZO Kulifing Ltd Owners Equity Statement For the month ended Jun 30, 2014 Owner's Capital (aun 04) $ } Add: investments ° Ne+ Income 2300 Less, Drawings : (9) Owners Capital (Jun 20) $ 2300 & Accounting A — zara CD vse 2, |lg Ray Neal ghas staked! a cmartphone -app developwent Company named "SoFtbyte". On september , 2017 the company fas completed the Following ctrangacten . during the vnenth — D Ray Neal tnvests $isow cash ain tHe business ovi September ol, 2019, Nl) S0Ftby te purchases computen equ pment Fon $4008 cast, » GoPtbyte: purchases headsek Be other accessories for $igoo on enedit, Dy) SoFtbyte receives $1200 cash rom cusbwens tor app development senvices it Qas penformed, V) SoPtbyte receives a bill for $250 From “the Daily News" -for advertising om ids online website but Postpones Payments unt) a laden date , vi) Softbyt+e performs services fon $3500 but heeeives $i500 cash, from custo meng,wily boftbyte pays the following expenses ay cash for September 3 office nent $600, calanies fc wages af employees $950 Kutlities $00, Vil) Softbyte pays is $250 "Daily News" Bill in cash which is due in ransactiom Cv), 1X) SoPtbyte receives $600 oe cash trom customers who fad been billed, ore Senvices Mm d¢nansaction (vt) 4) Ray Neal withdraws. ees $1300 eel ion the business fan biz pensonal use, Prepane a tabular gummany of the ‘nansa ction, | Then prepare Financial sdatemends fon | SoFtbyte company ,ososl ¢$ iz esos! ¢ in, 4 fp : _|— Oo0bb | COEI—]} e205) oo9l aot t Ove] : | ‘ OSt- { ost- 3 | —| | _3 | ooki-| + | {| - ose - | 000% | 0051 9 ost— | - ost | s 1 aoe) | 90%) 6 | 2091 loos | € 000% | eoot-| Zz | o°0S | jocosi| TF | C? sto jmidea | | 2] quhea Laiqunipoed . fasucdag | fmuany | sruoaona | sarouma| | tpuneray |_| ymudmts| sayadns [spunorry | 452 a + = oop 0501, Gp mtg F/UAAMO Sry Igy [ SpessySOF TBYTE Intome Statement For the month ended Seplemben 34,2017 Revenues Service Revenue ¢ 4700 Expenses ; Salaries Q.wages expense (00) Rent expense (600) Adverchsing expense @50) Utilities expense (200) Total expenses Ci9s5o) | Net Income fg 2450 SOFTBYTE Ounen’s Equity Statement For the month ended September 30,2017 Owners Capital (Sepo4) $ ° Add’ Investments 15000 Net Imcowme, 2450 Less? Drawings i300) g (6450 Owrer’s Capital (Sep 30)- SOF TRYTE Balance sheet September 30, 201} ; Assets cach $ Bo5o Accounts Receivable Irs) Supplies 1600 Equipment #000 Total Asserts $ 18050 peasLRes R= ness eo Liabilike s Accounts Payable $ 1600 Owners Equity Owner's Capita] 16450 Total liabilities S ounens equichy SOFTBYTE Cash Flow Statement For: the’ worth ended September 30,2017 Cash Flow from operating activites. — Cash receipts from nevenues $ 3300 + Cash payments for expenses " (950) cash Flew) -from investing activities punchase of equipment (7000) Cash. Flow-firom. financing activities Investment by. ow.nez] “ [5600 Drawings by owner 300 Net increase in’ cash 8050 Cash at the beginning , ° cash at the end (200+ 1500+ <0)aM Fabrics Ltd tas completed Fallewing Anam section on October, 2018 — ‘ Drssued stock 40 the wrens who invested $ So000 cash in the business D Paid $yavsd cash fon land. W) Bought $ser oF office supplies an’ account, \v) Received $5500 cash From cusdomonrs For given service. V) Performed! sonvices for sutdnmmers $3000 on account, wi) Paid cast, expenses | nent Pilon, employee Salany gioco, utilities foo, Vil) Paid 6400 on the account payable create ay transaction. (1), : vin) Owners paid pensonal funds to remodel foyne , IX) Received. flav For service: provided in Anansaction (v) x) fold land Bon exsh £22000 , XI) Declared 9 paid .a dividend of $2100 +o the stockboldens , Prepare a tabulan summary , Statement of Fmancial: position Caalance 5hee}) Hebe I cash Pow statement fom ot October, 2oly for ym fabnics Ltd,- op e0ses $ = oosts $ oT lied oo [epsh- | aose ° @a00s oo! Q0081| COS | GOOeS | QOEEE | FRbOL aole- _ | esre= | _ Qa0rZ— Q0022 Ol LL Q90!- | aoat 6 F5DAIING Mb FO WoHovSuoUL VON g — | aoh— ooh— [ a ootz-| - | el cote | 2 | Q00e | | » Q00€ Ss o0s5 sess | 4 | eos : aos |. \ | © . 0000 9000b— ct | i Q000S } . o0005 Tv sBemrvug | popideo| | a\qvd~a | | pucr aiquaiaraa vont Sa suadxg | mu2r2¥ | suaamo sniavama | tpuncry posse] 89 1\ddng |s_uno777| gsr2 + = oy esueo | Rumby supAMO Sayer Spessy 7 L —OM Fabrics Ltd, Balance ghee+ October 31,2018 Asset: cash $ 333200 Accounts Recelvabl e 2000 Supplies 500 Land 18000 Total Asset $¢ $3 FO abi lites, Ow nenes Equicty ; Liabilities . Accounts Payable $ 100 Ownens Equity Ownents Capital 53400 ~~ OM Fabrics 1 - Cash Flow Statement ___ Fon the month ended Cetoben 3)2018 Cash flow -frovn operating activities cash receipts from nevenues 6500} | Cash payments fon expenses (48 00) | Cash Flow -faom investing activities Purchase of land Gs 000)} * Supplies (oo) Cash floc from financing achvities | Investments by owner 50000} drawings by oumeq < Net incnease in cash 3332060 Cash at the beginning 2 Jeash at the end 4+ 3SeS & mes—_ 5] Manio Gonzalez opened a veterinary business named “Gonzalez Veteninany" on August 24,2012, | On August 3), the balance sheet showed cash $9 Accounts receivable firou, Supplies $600, oF fice | equipment feo00, Accounts Payable $3600 L | & tte Gonzalez’s capital £12300, During September, | the following tmansacton occured; | } Paid $2900 cash on accounts payable. | W) Collected $1360 of accounts mecelvable, mW) Purchased additional office’ equipment fore | $2Iop, but paid goo in cash, |) Canned revenue of $Fa00 of whic h $2500 is path im cash, §) Withdrew $lev cash Son poronal use, | M) Paid salanies $1700, rent #ue-4 900 & advertising expense $300, Vi) tmewined utilities expense on account fino, NW) Received $lawD from Capital Bank Money borrowed on a note Payable, | Prepare a tobulan sUmrmang and “Bee 4, \ | Financial Scfacte wen + a | Crtsiome Statement, ownen's Tn oe ace e, aCFexy | fon tHe cempany, |Cosez ¢ = CO8S? 1 ‘ 096s | avzai} reps, | ooool| SB on voce] 9 | ~ | -oo0l- Ss [ 7 oss oosz| © a __ | 00 8— c | me ___| eesi-| oo€! | } | eee] i. — 20er | +f | QokE! | aa3e | @209 | 209] COI} GICG on (a) Rab pando aiqedeg anes | Aqentzey ron | Jessodag | Smuanans Sure eng Spend | Sapory |Sunory = [era | Saydans | qunosoy YSe 2 _|royzesuouy | Apm2yZ $/UPAM® Saige Spessy———- Gonzalez Veterinary Income Statemend Fire the moth ended Septemben 30, 20/0. | | Revenues Service Revenue $ 8000 Expenses Salaries % wages ex pense 170'0) Rent expense @o9) Advercising expense C300) UHIites’ expense C9) Total expenses (3970) Ne+ Income ¢ 4930 bo ee Gonalez Veleninany, | Ownen’s Equity Strtement | For the wench ended Seplembor 26,2012. ———_—— ei | Owners Capital (Sep 04) | $13700 Add; investments ® | . Ne+ Income | 49230 | Less; Drawings | Goed Owners capital Gep 30) \ £17620 $$$Gonzalez Vetermnany Balance Sheet September 30,2012 Assets cash. # 15208 Accounts Receivable oo Supplies i Equipment s! Total Assets $ 222890 Liabilities 2 Owners Equi Liabilities Accounts Payable fF 270 Netes payable 10000 Owners Beutty Ownenss Capital 1F#6 30 Total ‘liabilities Rowven's equity 299 00Financial information of Flanagan Company at December, 31,2017 ‘tems js presented below — Equipment = glovao Utilities expense = $4000 cash = $3000 Accounts receivable = $9000 Service Revenue= $36000 | Salanies k wages expense = 8 7000 Rent expense = Ilaou Notes payable = £ 16500 Accounts Payable = $2000 Ovven’s Drawings= $5000 1) Determme the ‘total assety of at December 31, 20/7, W) Determine +he wet income Reported fon December, 20/7, WM) Determine the ownenrs equity at decemben 3) 2017, > +) Tatal Assets = Equipment + cash Accounts Receivable = 10000 + Fon + 9 0u0 = 24000 D Net Imcome = Revenues — Expenses = Senvice Revenue — (Rent expense. + Utilities expense + Salanies K wages expense) = 36000~- ( Nooo + 4000 +4000) = 1400 W Owrens Equity = Assets — Liabilities = Assets — (Accounts Payable + Notes Papert | Payable) = 27000 - (r000 + \@500) = &§500 ZL