CHAPTER 1

1. CHAPTER 1 BUSINESS DECISIONS And FINANCIAL ACCOUNTING ..

2. Objectives : • ACCOUNTING FOR BUSINESS DECISIONS • Users of accounting. • Generally Accepted Accounting Principles (GAAP). • THE BASIC ACCOUNTING EQUATION • FINANCIAL STATEMENTS

3. ACCOUNTING FOR BUSINESS DECISIONS Accounting :A system of (analyze, record, and summarize) the results of a business’s activities and then reporting the results to decision makers.

4. Users of accounting can be divided into two groups: • Internal Users • external users

6. This information can be presented in two kinds of reports. Managerial accounting reports. Include detailed financial plans and continually updated reports about the operating performance of the company. These reports are made available only to the company’s employees (internal users). 1-

7. 2- Financial accounting reports, called financial statements. Which are prepared periodically to provide information to people not employed by the business. These external financial statement users aren’t given access to detailed internal records of the company. Creditors and investors are the two primary external user.

8. Generally Accepted Accounting Principles GAAP

10. Some of Accounting Concepts GAAP

12. Assets An assets is an economic resource presently controlled by the company. It has measurable value and is expected to benefit the company by producing cash inflows or reducing cash outflows in the future.

13. Assets A1 Cash Accounts Receivable Notes Receivable Resources owned or controlled by a company Land Store Supplies Buildings Equipment 1-13

14. Liabilities Liabilities are measurable amounts that the company owes to creditors. If Almaraiborrows from bank, it would owe a liability called a Note Payable. when a company buys a goods from another company, it usually does so on credit by promising to pay for them at a later date. The amount owed is called am Account Payable. “Liabilities must be paid before any amounts are paid to stockholders” .

15. Liabilities A1 Accounts Payable Notes Payable Creditors’ claims on assets Wages Payable Taxes Payable 1-15

16. owner’s Equity It represent the owner’s claims on the business.

17. THE BASIC ACCOUNTING EQUATION Assets=Liabilities + Owner’s Equity Debit Accounts If Debit, and if Credit Credit Accounts If Credit, and if Debit

18. = + Assets Liabilities Equity Accounting Equation A1 Liabilities + Equity Assets 1-18

19. FINANCIAL STATEMENTS

24. Self-Study Practice In the space provided, indicate: (1) the type of account (A = asset, L = liability, OE = ownership equity, R = revenue, E = expense), and (2) whether it is reported on the income statement (I/S), statement of cash flows (SCF), or balance sheet (B/S). Account Title Type Statement Land Wages Expense Accounts Receivable Rent Revenue Contributed Capital Note Payable ـــــــــــــــــــــ ـــــــــــــــــــــ ـــــــــــــــــــــ ـــــــــــــــــــــ ـــــــــــــــــــــ ـــــــــــــــــــــ ـــــــــــــــــــــ ـــــــــــــــــــــ ـــــــــــــــــــــ ـــــــــــــــــــــ ـــــــــــــــــــــ ـــــــــــــــــــــ