Survey of accounting 6e chapter 2

Basic Accounting
Concepts

Chapter
2

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Learning Objectives
After studying this chapter, you should be able to:
•Describe the basic elements of a financial accounting
system.
•Analyze, record, and summarize transactions for a
corporation’s first period of operations.
•Prepare financial statements for a corporation’s first
period of operations.
•Analyze, record, and summarize transactions for a
corporation’s second period of operations.
•Prepare financial statements for a corporation’s second
period of operations.
©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Learning
Objective 1
Describe the basic elements of a
financial accounting system

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.

Basic Rules of an Accounting
System
Rules determine:
________
transactions
are to be
recorded

_______
transactions
are to be
recorded

_______
transactions
are to be
recorded

________
of the
transaction
to be
recorded

• A transaction is an __________ __________
that can affect one, two or more items in the
__________ __________.
©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.

Framework of an Accounting
System
The Accounting Equation

_______ = _____________ + __________
©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Integrated Financial Statement
Framework: Template
• By expanding the accounting equation, transactions can be
analyzed, summarized, and recorded within the integrated
financial statement framework.
Exhibit 1: Integrated Financial Statement Framework

Impact of transaction
on _____

Impact of transaction
on ______ ________

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Controls of an Accounting
System
THE ACCOUNTING EQUATION

MUST

BALANCE

Ending Cash on
_______ _______ =
Ending Cash on
__________ __ _______ ______

Net Income on
Income Statement =
Net Effects of
___________/___________
on ___________ ____________

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Learning
Objective 2
Analyze, record, and summarize
transactions for a corporation’s first
period of operations

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Integrated Financial Statement
Framework: Starting Family Health Care,
P.C.
• Dr. Landry invests $6,000 to start a practice

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Integrated Financial Statement
Framework: Borrowing Money
• Family Health Care, P.C. borrows $10,000 from
First National Bank

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Integrated Financial Statement
Framework: Buying Land
• Family Health Care buys land for $12,000 cash

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Integrated Financial Statement
Framework: Earning of Fees
• Family Health Care, P.C. earns fees of $5,500
and receives those fees in cash.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Integrated Financial Statement
Framework: Paying of Expenses
• Family Health Care, P.C. pays $2,900 in cash for

various expenses of doing business.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Integrated Financial Statement
Framework: Paying of Dividends
• Family Health Care, P.C. pays dividends of $1,500
to their only stockholder, Dr. Lee Landry.

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Integrated Financial Statements:
Family Health Care, P.C.
Exhibit 2: Family Health Care Summary of Transactions for September

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Observations from Family Health
that apply to all companies
Exhibit 3: Effects of Transactions on Stockholders’ Equity

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Learning
Objective 3
Prepare financial statements for a

corporation’s first period of operations

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


•

Preparation of Financial
Statements

This exhibit lists Family Health’s transactions in the order they
occurred; it does not group and summarize the transactions in a
meaningful manner.
Exhibit 2: Family Health Care Summary of Transactions for September

________ ________
components

__________ __
______ ______
components

________
__________
components

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Income Statement

Exhibit 4: Family Health Care Financial Statements for September

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Retained Earnings Statement
Exhibit 4: Family Health Care Financial Statements for September

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Balance Sheet
Exhibit 4: Family Health Care Financial Statements for September

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Statement of Cash Flows
Exhibit 4: Family Health Care Financial Statements for September

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Integrated Financial Statements
Exhibit 5: Family Health Care Integrated Financial Statements for September

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Learning

Objective 4
Analyze, record, and summarize
transactions for a corporation's
second period of operations

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.


Summary of October
Transactions

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publically accessible website, in whole or in part.