Introduction

1. Introduction Introduction To Accounting

2. Introduction Performance Objectives: • Define accounting • Explain the importance of accounting information • Describe the various career opportunities in accounting

3. Why do we want to learn Accounting? • Language of Business

4. Definition of Accounting • Keep track of receipts • Revenue or dollars in • Expenses or dollars out • Keep track of debt • Keep track of investments • Keep track of assets (stuff you own) • Calculate profit (earnings) • Cash Flow

5. Define Accounting • Accounting • The process of analyzing, classifying, recording, summarizing, and interpreting business transactions in financial or monetary terms; sometimes mistakenly called bookkeeping

6. Define: Business Transactions (page 1) A business transaction is an event that has a direct effect on the operation of an economic unit, is expressed in terms of money, and is recorded Examples of Economic Unit: Business Entity Sole Proprietorship Corporation College Government Agencies Churches Clubs Common terms: Firm Company Process of analyzing, classifying, recording, summarizing, and interpreting business transactions in financial or monetary terms

7. Process of analyzing, classifying, recording, summarizing, and interpreting business transactions in financial or monetary terms • Analyzing? • Look at receipts • Look at loan documents • Etc….

8. Classifying? Is it cash in? Is it cash out? Is it an expense? Is it debt? Etc…. Classifying? Asset Things you own Liability Debt Owners’ Equity Assets - Liabilities Loose Definitions Process of analyzing, classifying, recording, summarizing, and interpreting business transactions in financial or monetary terms

9. Process of analyzing, classifying, recording, summarizing, and interpreting business transactions in financial or monetary terms • Recording? • Write it down • Etc….

10. Process of analyzing, classifying, recording, summarizing, and interpreting business transactions in financial or monetary terms • Summarizing? • Add it up • Create a report • Etc….

11. Process of analyzing, classifying, recording, summarizing, and interpreting business transactions in financial or monetary terms • Interpreting? • Look at reports and make decisions • Etc….

12. Process of analyzing, classifying, recording, summarizing, and interpreting business transactions in financial or monetary terms

13. Definitions • Generally accepted accounting principles (GAAP) • The rules or guidelines used for carrying out the accounting process • Who creates the rules? • Voters  Congress  SEC  PCAOB  FASB  GAAP • Congress (107th) PCAOB

14. Definitions • There is not an exact distinction between bookkeeping & accounting • In General: • Bookkeeping • Systematic recording of business transactions in financial terms • Accounting • Create accounting system, audit accounting system, or create official reports

15. Purpose of Accounting • To provide useful information to people who make business decisions • Who makes business decisions? • Users of Accounting Information: • Owners/Investors • Managers • Creditors • Government Agencies

16. Owners • Owners have invested their money or goods in a business organization • Owners desire information regarding: • Company’s earnings • Prospects for future earnings • Company’s ability to pay debts

17. Managers • Managers must know the language of business so that they can manage the economic unit • Managers use or create accounting information in order to: • Prepare financial reports • Understand reports and budgets • Express future plans in financial terms

18. Creditors • Creditors lend money or extend credit to the company • Creditors look at accounting information to assess the company’s ability to pay its debts • Examples of creditors: • Banks • Suppliers • Lending Institutions

19. Government Agencies • Taxing authorities must verify information submitted by companies • Examples of taxes: • Income taxes • Sales taxes • Employment taxes • Public companies must submit the correct reports to regulatory agencies

20. Career Opportunities In Accounting • Accounting Clerk/Technician • Bookkeeper • Paraprofessional Accountant • Accountant • CPA • Managerial/Private • Not-for-profit

21. Accounting Clerk/Technician • Routine recording of financial information • Generally, accounting clerks work with one part of the accounting system such as: • Accounts Receivable • Accounts Payable • Payroll • Minimum requirements: • One semester of an accounting course (book) • Reality 2004: (1 – 2 year accounting certificate)

22. Bookkeeper • Supervises accounting clerks or accounting system in small- to medium-sized company • Minimum requirements: • One to two years of accounting as well as experience as an accounting clerk

23. Paraprofessional Accountant • In-between a bookkeeper & an accountant • A person who is qualified in accounting to assume the duties of a general bookkeeper as well as some of those of a professional accountant under that accountant’s supervision

24. Accountant • CPA (Certified Public Accountant) • Design and audit accounting systems • Provide financial advice about business operations • Prepare tax returns • Minimum Requirements: • College degree (150 units – 5 years of college) • Pass CPA exam • Accounting experience

25. Managerial/Private Manage and create accounting system Prepare budgets Determine costs Prepare financial reports Not-for-profit Accountants that work for business entities such as: Government agencies Hospitals Churches Schools Accountant