ACCT 2301 Week 1

ACCT 2301 Week 1  | Assignment 1 Help | Central Texas College

1.1 Accounting Activities and Users

LEARNING OBJECTIVE 1

Identify the activities and users associated with accounting.

What consistently ranks as one of the top career opportunities in business? What frequently rates among the most popular majors on campus? What was the undergraduate degree chosen by Nike founder Phil Knight, Home Depot co-founder Arthur Blank, former acting director of the Federal Bureau of Investigation (FBI) Thomas Pickard, and numerous members of Congress? Accounting.¹ Why did these people choose accounting? They wanted to understand what was happening financially to their organizations. Accounting is the financial information system that provides these insights. In short, to understand your organization, you have to know the numbers.

1.1.2 Who Uses Accounting Data

The financial information that users need depends upon the kinds of decisions they make. There are two broad groups of users of financial information: internal users and external users.

1.3 The Accounting Equation

LEARNING OBJECTIVE 3

State the accounting equation, and define its components.

The two basic elements of a business are what it owns and what it owes. Assets are the resources a business owns. For example, Google has total assets of approximately $93.8 billion. Liabilities and stockholders' equity are the rights or claims against these resources. Thus, Google has $93.8 billion of claims against its $93.8 billion of assets. Claims of those to whom the company owes money (creditors) are called liabilities. Claims of owners are called stockholders' equity. Google has liabilities of $22.1 billion and stockholders' equity of $71.7 billion.

1.5 The Financial Statements

LEARNING OBJECTIVE 5

Describe the four financial statements and how they are prepared.

Companies prepare four financial statements from the summarized accounting data (see Helpful Hint):

·                     1.An income statement presents the revenues and expenses and resulting net income or net loss for a specific period of time.

·                     2.A retained earnings statement summarizes the changes in retained earnings for a specific period of time.

·                     3.A balance sheet reports the assets, liabilities, and stockholders' equity of a company at a specific date.

·                     4.A statement of cash flows summarizes information about the cash inflows (receipts) and outflows (payments) for a specific period of time.

These statements provide relevant financial data for internal and external users. Illustration 1.10 shows the financial statements of Soft byte Inc. Note that the statements shown in Illustration 1.10 are interrelated:

·                     1. Net income of $2,750 on the income statement is added to the beginning balance of retained earnings in the retained earnings statement.

·                     2. Retained earnings of $1,450 at the end of the reporting period shown in the retained earnings statement is reported on the balance sheet.

·                     3. Cash of $8,050 on the balance sheet is reported on the statement of cash flows.

·         HELPFUL HINT

·         The income statement, retained earnings statement, and statement of cash flows are all for a period of time, whereas the balance sheet is for a point in time.

LEARNING OBJECTIVE *6

Explain the career opportunities in accounting.

Why is accounting such a popular major and career choice? First, there are a lot of jobs. In many cities in recent years, the demand for accountants exceeded the supply. Not only are there a lot of jobs, but there are a wide array of opportunities. As one accounting organization observed, “accounting is one degree with 360 degrees of opportunity.”