Blocher/Chen/Lin

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Anthony, Hawkins, and Merchant
ACCOUNTING TEXT AND CASES
Tenth Edition

• The McGraw-Hill Companies, Inc., 1999

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1
The Nature and Purpose of Accounting
Part One Financial Accounting

• The McGraw-Hill Companies, Inc., 1999

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Planning
Slide 1-1

• Planning is the process of deciding what actions
  should be taken in the future.

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Planning
Slide 1-2
Planning involves making decisions. Decisions
are arrived at by--

• recognizing that a problem or an opportunity
  exists
• specifying and ranking the criteria to be used to
  determine the best solution
• identifying alternative ways of addressing the
  problem or opportunity
• analyzing the consequences of each alternative
• comparing these consequences to each other and
  the criteria so as to decide which is best

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The Nature and Purpose of Accounting
Slide 1-3
Information
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Relationship of Management Functions
Slide 1-4
Planning
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Relationship of Management Functions
Slide 1-5
Planning
Implementation
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Relationship of Management Functions
Slide 1-6
Planning
Implementation
Control
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Relationship of Management Functions
Slide 1-7
Planning
Implementation
Control
Appropriate action
Feedback
Plan revision
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The Balance Sheet
Slide 1-8
HOLDEN COMPANY Balance Sheet As of December 31,
1999 (000 omitted)
Assets
Liabilities and Owners Equity Current
assets Current liabilities Cash
1,449 Accounts payable 5,602 Marketable
securities 246 Bank loan payable 1,000 Accounts
receivable, net 9,944 Accrued liabilities 876 In
ventories 10,623 Estimated tax
liability 1,541 Prepaid expenses
389 Current portion of long- term
debt 500 Total current assets
22,651 Total current liabilities 9,519
Current Section
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The Balance Sheet
Slide 1-9
Assets
Liabilities and Owners
Equity Noncurrent assets Noncurrent
liabilities Property, plant, equipment Long-te
rm debt, less at cost 26,946 current
portion 2,000 Less Accumulated Deferre
d income taxes 824 Depreciation 13,534
Total liabilities 12,343 Property, plant,
equipment net 13,412 Owners
equity Investments 1,110 Common
stock 1,000 Patents and trademarks 403 Additiona
l paid-in capital 11,256 Goodwill 663
Total paid-in capital 12,256 Retained
earnings 13,640 Total owners
equity 25,896 Total liabilities and owners
Total assets 38,239 and owners
equity 38,239
Noncurrent Section
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The Accounting Equation
Slide 1-10
Assets Liabilities Owners Equity
Assets are economic resources which are owned by
a business and are expected to benefit future
operations.
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The Accounting Equation
Slide 1-11
Assets Liabilities Owners Equity
Liabilities are obligations of the entity to
outside parties who have furnished resources
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Income Statement
Slide 1-12
HOLDEN COMPANY Income Statement For the Year
2000 (000 omitted)

• Sales revenue 75,478
• Less cost of sales 52,227
• Gross margin 23,251
• Less operating expenses 10,785
• Income before taxes 12,466
• Provision for income taxes 6,344
• Net income 6,122

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Financial Statement Objectives
Slide 1-13
Financial reporting should provide information

• Useful to present and potential investors and
  creditors in making rational investment and
  credit decisions
• Comprehensible to those who have a reasonable
  understanding of business and economic activities
  and are willing to study the information with
  reasonable diligence
• About the economic resources of an enterprise,
  the claims to those resources, and the effects of
  transactions and events that change resources and
  claims to those resources
• About an enterprises financial performance
  during a period

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A Package of Accounting Reports
Slide 1-14
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A Package of Accounting Reports
Slide 1-15
Income Statement For the Year 2000
Sales revenue 75,478 Less cost of
sales 52,222 Gross margin 23,351 Less operating
exp. 10,785 Income before taxes 12,466 Provision
for taxes 6,344 Net income, 1999 6,122
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A Package of Accounting Reports
Slide 1-16
Income Statement For the Year 2000
Sales revenue 75,478 Less cost of
sales 52,222 Gross margin 23,351 Less operating
exp. 10,785 Income before taxes 12,466 Provision
for taxes 6,344 Net income, 1999 6,122
Statement of Retained Earnings
Retained earnings 13,640 Add net income
6,122 19,762 Less dividends 4,390 Retained
earnings 15,372
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A Package of Accounting Reports
Slide 1-17
Income Statement For the Year 1999
Sales revenue 75,478 Less cost of
sales 52,222 Gross margin 23,351 Less operating
exp. 10,785 Income before taxes 12,466 Provision
for taxes 6,344 Net income, 1999 6,122
Statement of Retained Earnings
Retained earnings 13,640 Add net income
6,122 19,762 Less dividends 4,390 Retained
earnings 15,372
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A Package of Accounting Reports
Slide 1-18
Statement of Retained Earnings
Retained earnings 13,640 Add net income
6,122 19,762 Less dividends 4,390 Retained
earnings 15,372
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A Package of Accounting Reports
Slide 1-19
Statement of Retained Earnings
Retained earnings 13,640 Add net income
6,122 19,762 Less dividends 4,390 Retained
earnings 15,372
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Summary
Slide 1-20
An organization has four types of accounting
information

• Operating information, which has to do with the
  details of operations
• Management accounting information, which is used
  internally for planning, implementation, and
  control
• Financial accounting information, which is used
  both by management and external parties
• Tax accounting information, which is used to file
  tax returns with taxing authorities

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Chapter 1
The End