Chapter 1 Introduction to Accounting

2. 1 Competencies forIntroduction to Accounting Define accounting and distinguish it from bookkeeping. Describe the six branches of accounting. Identify and describe organizations that have influenced hospitality accounting practices. Describe basic forms of business organization and their advantages and disadvantages. Describe the responsibilities of a hospitality firm’s accounting department.

3. 2 Competencies for Introduction to Accounting Apply generally accepted accounting principles to hospitality situations. Describe the major types of financial statements: balance sheets, income statements, and statements of cash flows. Describe the fundamental accounting equation and apply it to accounting situations.

4. 3 Accounting Economic information is financial—stated in monetary terms Accounting process Record, classify, and summarize economic events Differences between bookkeeping and accounting Bookkeeping is only part of accounting—recording and classifying events Accounting also includes summarizing and interpreting

5. 4 Branches of Accounting Financial accounting Cost accounting Managerial accounting Tax accounting Auditing Accounting systems

6. 5 Organizations that Influence Accounting American Institute of Certified Public Accountants (AICPA) Financial Accounting Standards Board (FASB) Securities and Exchange Commission (SEC) Internal Revenue Service (IRS) Hospitality Financial and Technology Professionals (HFTP)

7. 6 Forms of Business Organization Sole proprietorship—most common Partnership—owned by two or more people Limited partnership Limited liability company Corporation—legal entity created by state or other political authority S Corporation

8. 7 Generally Accepted Accounting Principles Cost Business entity Continuity of business unit Unit of measurement Objective evidence

9. 8 Major Financial Statements and Accounting Methods Balance Sheet Outlines the fundamental accounting equation Income Statement Also called profit & loss statement and other names Shows results of operations for a period Statement of Cash Flows (SCF) Shows cash inflows and outflows for a period Cash Basis Accounting Method Recognizes accounting transaction at point of cash inflow or outflow

10. 9 Major Financial Statements and Accounting Methods Accrual Basis Accounting Method Recognizes all revenues earned and records all expenses incurred for the period Matches expenses with revenues Requires adjusting entries

11. 10 The Fundamental Accounting Equation Assets = Liabilities + Owners’ Equity