Financial Accounting and Accounting StandardsIdentify the stakeholders that have an interest in accounting information, presented in financial statement.
Understand why ethics is a fundamental business concept. And explain accounting standards, the measurement principles and assumption used in accounting.
Identify the sector of accounting.
Identifies kinds of company and corporation.
Study Objectives
Slide 1-*
The purpose of accounting:
to identify, record, and communicate the economic events of an
organization to
interested users.
Slide 1-*
Three Activities
Slide 1-*
Customers
User
1. Can we afford to give our employees a pay raise?
Human Resources
Should any product lines be eliminated?
4. Is cash sufficient to pay dividends to shareholders?
5. What price for our product will maximize net income?
What is Accounting?
6. Will the company be able to pay its debts?
Investors
Management
Finance
Marketing
Creditors
Ethics In Financial Reporting
SO 3 Understand why ethics is a fundamental business concept.
Standards of conduct by which one’s actions are judged as right or wrong, honest or dishonest, fair or not fair, are Ethics.
Recent financial scandals include: Enron (USA), Parmalat (ITA), Satyam Computer Services (IND), AIG (USA), and others.
Effective financial reporting depends on sound ethical behavior.
Slide 1-*
Ethics In Financial Reporting
SO 3 Understand why ethics is a fundamental business concept.
Slide 1-*
Ethics are the standards of conduct by which one's actions are judged as:
right or wrong.
honest or dishonest.
fair or not fair.
all of these options.
Ethics are the standards of conduct by which one's actions are judged as:
right or wrong.
honest or dishonest.
SO 3 Understand why ethics is a fundamental business concept.
Solution on notes page
Slide 1-*
SO 4 Explain accounting standards and the measurement principles.
Financial Accounting Standards Board (FASB)
Accounting Standards
Slide 1-*
Cost Principle (Historical) – dictates that companies record assets at their cost.
Issues:
Reported at cost when purchased and also over the time the asset is held.
Cost easily verified, market value is often subjective.
Fair value information may be more useful.
The Building Blocks of Accounting
Measurement Principles
Slide 1-*
Fair Value Principle – indicates that assets and liabilities should be reported at fair value.
In determining which measurement principle to use, companies weigh the factual nature of cost figures versus the relevance of fair value.
Only in situations where assets are actively traded, such as investment securities, is the fair value principle applied.
The Building Blocks of Accounting
Measurement Principles
Slide 1-*
Monetary Unit Assumption – include in the accounting records only transaction data that can be expressed in terms of money.
Economic Entity Assumption – requires that activities of the entity be kept separate and distinct from the activities of its owner and all other economic entities.
Proprietorship.
Partnership.
Corporation.
The Building Blocks of Accounting
SO 5 Explain the monetary unit assumption and the economic entity assumption.
Slide 1-*
Often retail and service-type businesses
Generally unlimited personal liability
Limited liability
Often small service-type businesses
Owner receives any profits, suffers any losses, and is personally liable for all debts.
SO 5 Explain the monetary unit assumption and the economic entity assumption.
The Building Blocks of Accounting
Slide 1-*
Combining the activities of Kellogg and General Mills would violate the
cost principle.
ethics principle.
Combining the activities of Kellogg and General Mills would violate the
cost principle.
ethics principle.
Review Question
SO 5 Explain the monetary unit assumption and the economic entity assumption.
The Building Blocks of Accounting
Solution on notes page
True
False
Indicate whether each of the following statements presented below is true or false.
Solution on notes page
SO 5 Explain the monetary unit assumption and the economic entity assumption.
The Building Blocks of Accounting
The three steps in the accounting process are identification, recording, and communication.
The two most common types of external users are investors and company officers.
Slide 1-*
Career Opportunities
APPENDIX
Government as a government tax officer, as government auditor (BPK in Indonesia)
Forensic accounting emphasize on investigation regarding any accounting fraud (such as KPK)
Slide 1-*
Proprietorship
Partnership
Corporation
SO 5 Explain the monetary unit assumption and the economic entity assumption.
The Legal Form of Company
Slide 1-*
Often small service-type businesses
Owner receives any profits, suffers any losses, and is personally liable for all debts.
SO 5 Explain the monetary unit assumption and the economic entity assumption.
The Legal Form of Company
Perusahaan Perorangan
Slide 1-*
Often retail and service-type businesses
Generally unlimited personal liability
Partnership agreement (active & passive partner)
SO 5 Explain the monetary unit assumption and the economic entity assumption.
The Legal Form of Company
Slide 1-*
Limited liability
Public company if the share traded at stock exchange (tbk)
SO 5 Explain the monetary unit assumption and the economic entity assumption.
The Legal Form of Company
Perseroan Terbatas
Slide 1-*
A business organized as a separate legal entity under state law having ownership divided into shares is a
proprietorship.
partnership.
corporation.
sole proprietorship.
SO 5 Explain the monetary unit assumption and the economic entity assumption.
Review Question
Solution on notes page
A business organized as a separate legal entity under state law having ownership divided into shares is a
proprietorship.
partnership.
corporation.
SO 1 Identify the differences between service and merchandising companies.
Kinds of Company
SO 1 Identify the differences between service and merchandising companies.
Merchandising Companies
Wholesaler
Retailer
Consumer
The primary source of revenues is referred to as sales revenue or sales.
Slide 1-*
Service company
SO 1 Identify the differences between service and merchandising companies.
Provide service to their customers, such as auto repair company, bank, arcihtect, consultant
The primary source of revenues is referred to as fee or service revenue
Slide 1-*
SO 1 Identify the differences between service and merchandising companies.
Operating Cycle of Company
actions are judged as:
actions are judged as:
SO 3 Understand why ethics is a fundamental business concept.
Solution on
notes page
Slide
1
would violate the
would violate the
and the economic entity assumption.
The Building Blocks of Accounting
The Building Blocks of Accounting
The Building Blocks of Accounting
Solution on
notes page
statements presented below is true or false.
Solution on
notes page
and the economic entity assumption.
The Building Blocks of Accounting
The Building Blocks of Accounting
The Building Blocks of Accounting
1.
identification, recording, and communication.
are investors and company officers.
3.
liability as compared to partners in a partnership.
True
False
True
Slide
1
a.
proprietorship.
b.
partnership.
c.
corporation.
d.
a.
proprietorship.
b.
partnership.
c.
corporation.
d.
and the economic entity assumption.
Review Question
Solution on
notes page