Accounting for Business Decisions--MBA 301

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Accounting for Business Decisions--MBA 301

• Summer 2002
• M/W
• William F. OBrien, MBA, CPA

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Financial Accounting Model
(useful relevant)
Company
Users
F/S
Economic Decisions
Financial Impact
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Managerial Accounting Model
Plan
Accounting Information
Implement
Adjust
Monitor
Communication Environment
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Users of Financial Information

• Internal
• Owners, Managers Employee
• External
• Owners
• Creditors and Vendors
• Public Interest Groups Regulators
• Tax Authorities

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Accounting Business Skills

• Business Perspective
• Organizational Focus
• Bias for Action
• Communication Excellence
• People Proficiency

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Financial Management Guidelines

• Cc
• KTT
• MBWA
• R ƒ R3
• responsiveness
• reliability
• relevance

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Financial Statement Content

• Balance Sheet
• Statement of Income
• Statement of Cash Flows
• Statement of Owners Equity
• Footnotes
• Management Discussion Analysis
• Mgt. Letter
• Auditors Report

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Financial Statement Relationships
Stmt of S/E
Balance Sheet
Income Statement
Statement of Cash Flows
Current Assets Non- current Assets
Current Liabilities Long- term Debt Equity
Revenue Cost of Goods Sold (COGS) Gross
Margin Operating Exps. Net Income
Operating Cash Investing Cash Financing
Cash Change in Cash Beginning Cash Ending Cash
Beginning S/E Net Income Less
Dividends Ending S/E
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Auditors

• External Auditing
• Audit Reports
• Assessment of IAC
• Internal Auditing

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Standard Setting Process

• SEC (Securities and Exchange Commission)
• AICPA (Am. Institute of CPAs)
• FASB (Financial Acctg. Stds. Board)
• GASB (Govt. Acctg. Stds. Board)

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Current Environment

• Taxation
• International Considerations
• Litigation
• Ethics
• Social Issues

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Reporting Concerns

• Management Bias
• Overstatement
• Taking a Bath
• Hidden Reserves
• Off-Balance Sheet Financing
• Choice of Accounting Options
• Historical Cost
• No Value for H/R Related Assets

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Ethics and You

• You will face an ethical challenge
• It could impact
• Your job
• Your family
• Your relationships
• Your financial stability
• Your physical well-being
• You have only ONE reputation...

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Intl. Acctg. Model Influences

• Rel. between Businesses and Sources of capital
• Political Economic Ties
• Legal System
• Inflation Levels
• Size Complexity of Businesses
• Culture

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International Models

• British - American...disclosure driven
• Continental...bank driven
• So. American...inflation driven
• Mixed Economy...govt-capital driven
• Intl. Stds...harmonization driven
• Communist...govt plan driven
• Islamic...religion driven (no interest)

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Businesses are like Fruit Trees
Fruit Operating Activities
Trunk Branches Investing Activities
Roots Financing Activities
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Financial Statement Content

• Balance Sheet
• Statement of Income
• Statement of Cash Flows
• Statement of Owners Equity
• Footnotes
• Management Discussion Analysis
• and Mgt. Letter
• Auditors Report

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Financial Statement Relationships
Stmt of S/E
Balance Sheet
Income Statement
Statement of Cash Flows
Current Assets Non- current Assets
Current Liabilities Long- term Debt Equity
Revenue Cost of Goods Sold (COGS) Gross
Margin Operating Exps. Net Income
Operating Cash Investing Cash Financing
Cash Change in Cash Beginning Cash Ending Cash
Beginning S/E Net Income Less
Dividends Ending S/E
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Accounting Cycle Tools

• Assets Liabilities Equity
• Debits Credits
• The T-Account

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The T-Account
ASSETS
LIABILITIES AND EQUITY
Debit Credit
Debit Credit
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Accounting (Bookkeeping) Cycle-modified

• Analyze Transaction
• Record and Post
• Summarize Accounts
• Unadjusted Trial Balance
• Adjusting Journal Entries (AJEs)
• Adjusted Trial Balance
• Prepare Income Statement
• Closing Entries
• Final Trial Balance
• Prepare Balance Sheet, SCF and SSE

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4442

• Assumptions
• Economic Entity
• Fiscal Period
• Going Concern
• Stable Currency
• Primary Valuation Bases
• PV
• FMV
• HC
• RC

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4442...cont

• Principles
• Objectivity
• Matching
• Revenue Recognition
• Consistency
• Exceptions
• Conservatism
• Materiality