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BU8101 Week 1

by: zzhong004 Notetaker

BU8101 Week 1 BU8101

zzhong004 Notetaker
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The nots covers the topic gone through week 1 of BU8101 accounting: a user perspective with all the definitions to professional terms and summary of the equations required in Week 1. Generally this...
Accounting: A User Perspective
Class Notes
Accounting. NTU business minor.




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This 4 page Class Notes was uploaded by zzhong004 Notetaker on Monday February 29, 2016. The Class Notes belongs to BU8101 at Nanyang Technological University taught by in Summer 2015. Since its upload, it has received 278 views. For similar materials see Accounting: A User Perspective in Business Administration at Nanyang Technological University.

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Date Created: 02/29/16
•   WHAT’S  BUSINESS  AND  ITS  GOALS   A  business  is  an  economic  entity  that  aims  to  sell  goods  and  services  to  customers  at   prices  that  will  provide  an  adequate  return  to  its  owners.       There  are  two  goals  of  business:   1.   Profitability   A  primary  goal  of  a  successful  business  is  to  create  value  for  its  owners  through   delivering  products  that  satisfy  customers’  desires  at  a  reasonable  price.       2.   Liquidity  a  business  must  have  sufficient  cash  to  meet  its  current  and  future   obligations.   Value  Added  =  Sales  Price  –  Total  Cost  of  Resources  Consumed  to   Produce  the  Goods  or  Service.       •   CATEGORIZE  BUSINESS  ACTIVITIES   v   Financing  Activities   Financing  activities  occur  when  owner  or  creditors  provide  resources  to  the   business  or  when  the  business  transfers  resources  to  owners  or  creditors.       v   Investing  Activities   Investing  activities  involve  the  acquisition  or  disposal  of  long-­‐term  resources   used  by  a  business.     v   Operating  Activities   Operating  activities  are  those  activities  necessary  to  acquire  and  sell  goods  and   services     •   TYPES  OF  BUSINESS  ORGANIZATION   Ø   Sole  proprietorship   o   Generally  owned  by  one  person   o   Often  small  service-­‐type  business   o   Owner  receives  all  profits,  bears  all  losses,  and  is  personally  liable  for  all   debts.       Ø   Partnership   o   Owned  by  two  or  more  persons   o   Often  retail  and  service-­‐type  businesses   o   Generally  unlimited  personal  liability   o   Partnership  agreement     Ø   Corporation   o   Ownership  divided  into  shares  of  stock   o   Separate  legal  entity  organized  under  company’s  act   o   Limited  liability   o   Professional  management     •   ACCOUNTING  REGULATIONS   v   Generally  Accepted  Accounting  Principles  (GAAP)   a.   Standard  rules  and  practices  as  a  general  guide  for  financial  reporting   purpose   b.   Accounting  Standard  Council  prescribes  Financial  Reporting  Standards  in   Singapore.     v   The  Companies’  Act   Requires  companies  to  issue  financial  statements  to  users  at  specified   intervals  and  to  comply  with  financial  reporting  standards.  (  note:  the   accounting  method  a  company  used  most  be  constant  throughout  the  life   of  the  business)     •   THE  IMPROTANCE  OF  ACCOUNTING  REGULATIONS   Ø   The  Accounting  and  Corporate  Regulatory  Authority   o   Regulates  business  and  the  public  accountancy  profession  in  Singapore   o   Enforce  and  monitors  compliance  with  disclosure     Ø   Independent  Audit   o   An  audit  is  a  detailed  examination  of  a  company’s  financial  report  to   check  for  compliance  with  the  Companies’  Act  and  with  Financial   Reporting  Standards  and  that  the  report  fairly  represents  a  company’s   business  activities.       •   CERTAIN  IMPROTANT  ACCOUNTING  CONCEPTS   Ø   Financial  Statements:   §   Balance  sheet:  reports  assets,  liabilities  and  owner’s  equity  as  at  a   specific  date.   §   Income  statements:  reports  revenue  and  expenses  for  a  period  of   time.   §   Owner’s  equity  statement:  reports  the  change  in  owner’s  equity  for  a   specific  period  of  time   §   Statements  of  cash  flows:  reports  sources  and  uses  of  cash  for  a   specific  period  of  time.       Ø   Concepts  for  accounting  process:   o   Accounting  entity:  keep  business  and  personal  records  separate.     o   Going  concern:  business  will  operate  into  the  foreseeable  future.  (health   future  development)   o   Monetary  unit:  ONLY  record  transactions  denominated  in  monetary   units.   o   Time  period:  the  economic  life  of  a  business  can  be  divided  into  equal   time  period  (usually  one  financial  year).   o   Historical  cost:  assets  should  be  recorded  at  cost  (as  the  business  used   resources  to  purchase  the  assets)   o   Full  disclosure:  any  facts  that  will  make  a  difference  of  financial   statements  users  should  be  disclosed.       Assets  =  Liabilities  +  Owner’s  Equity   ü   Assets:  An  asset  is  a  resource  with  economic  value  that  an  individual,   corporation  or  country  owns  or  controls  with  the  expectation  that  it   will  provide  future  benefit.       ü   Liability:  A  liability  is  a  company's  legal  debt  or  obligation  that  arise   during  the  course  of  business  operations.  Liabilities  are  settled  over   time  through  the  transfer  of  economic  benefits  including  money,   goods  or  services.     ü   Owner’s  Equity:  It  represents  the  owners’  claim  to  the  assets  of  the   business.  i.e.  owner's  equity  represents  the  owner's  investment  in  the   business  minus  the  owner's  draws  or  withdrawals  from  the  business   plus  the  net  income  (or  minus  the  net  loss)  since  the  business  began.     OE  =  capital  stocks  +  revenue  –  expense  –  dividends       •   RELATIONSHIP  AMONG  FINANCIAL  STATEMENTS   LO 7 Relationships Among Financial Statements Time Date at Date at end beginning of Income Statement of period period Revenue - Expenses Net Income Statement of Changes in Equity Balance Sheet Balance Sheet Beginning of equity A = L + OE Issuance of shares A = L + OE Net income - Dividend Ending Equity Statement of Cash Flows Cash Provided (Used) by: Operating Activities Investing Activities Financing Activities + Beginning Cash Balance Ending Cash Balance 1-51 © Lau Yin Kheng   Picture  credit  to  Pro  Lau  Yin  Kheng    


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