Introduction to business: accounting

CC-BY-SA

Transcript

1. Accounting:
   decision making by
   the numbers
   

   View Slide

2. Quiz
   • Closed book/closed notes
   • You may collaborate with your team
   • You are responsible for the answers
   on your quiz
   • You do not have to choose the same
   answers as your team
   • Put phones away
   

   View Slide

3. What is accounting?
   

   View Slide

4. organizing, analyzing, and
   reporting financial information
   

   View Slide

5. information?
   

   View Slide

6. data?
   

   View Slide

7. View Slide

8. SO?!?
   

   View Slide

9. what context do we need to
   make data meaningful?
   

   View Slide

10. price − cost
    price
    = margin
    price x sales = revenue
    cost x sales = CGS
    revenue − CGS = gross profit
    

    View Slide

11. Managerial Accounting
    (insider information)
    
    cost accounting
    
    planning
    
    controlling
    
    tax accounting
    

    View Slide

12. Financial Accounting
    (outsider information)
    
    annual report
    
    private accountant (in-house)
    
    public accountant (clients on a fee
    basis)
    
    Financial Accounting Standards
    Board (FASB)
    
    Generally Accepted Accounting
    Practices (GAAP)
    

    View Slide

13. View Slide

14. Auditing: reviewing and
    evaluating records
    
    independent audit: accuracy of
    company’s financials
    
    internal audit
    

    View Slide

15. Tax Accounting
    
    trained in tax law
    
    prepares tax returns
    
    prepares tax strategies
    

    View Slide

16. Balance Sheet: shows profits &
    losses as of specific date
    Fundamental Accounting Equation
    Assets = Liabilities + Owners’ Equity
    

    View Slide

17. Tangible Assets
    
    fixed assets (property, plant &
    equipment PPE)
    
    land
    
    buildings & improvements
    
    equipment
    
    vehicles
    
    furniture & fixtures
    

    View Slide

18. Tangible Assets
    
    current assets (can be converted to
    cash w/in one year)
    
    raw materials
    
    work in progress
    
    finished inventory
    
    accounts receivable
    

    View Slide

19. Intangible Assets
    
    goodwill
    
    intellectual property
    
    trademarks
    
    copyrights
    
    patents
    

    View Slide

20. Liabilities
    
    current liabilities (due in less than one
    year)
    
    accounts payable
    
    long-term liabilities (due in one year
    or more)
    
    notes payable
    
    bonds payable
    

    View Slide

21. Income Statement
    
    shows profit (loss) over a certain
    period
    
    revenue – CGS = gross margin
    
    gross margin – operating expenses =
    net income before taxes
    
    net income before taxes – taxes = net
    income (loss)
    

    View Slide

22. Statement of cash flows
    • changes to cash balance
    • operating
    • inventory, accounts
    receivable/payable, taxes
    • investing
    • equipment, investments
    • financing
    • debt, dividends
    

    View Slide

23. Valuation issues
    
    depreciation
    
    valuation method: cost (book),
    market, replacement
    
    cost of goods sold
    
    FIFO, LIFO
    

    View Slide

24. Liquidity Ratios
    
    current ratio:
    current assets
    current liabilities
    
    acid-test (quick) ratio:
    cash + marketable securities + receivables
    current liabilities
    

    View Slide

25. Debt (Leverage)
    debt to OE:
    total liabilities
    owners’ equity
    

    View Slide

26. Profitability
    EPS:
    net income after taxes
    number of shares outstanding
    return on sales:
    net income
    net sales
    return on equity:
    net income after tax
    owners’ equity
    

    View Slide