![Page 1: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/1.jpg)
ACCOUNTING ASWSUMMER 2005
Mark Lang
![Page 2: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/2.jpg)
OVERVIEW
• Overview of ASW
- work through syllabus
• Overview of accounting
- goals
- structure
- major financial statements
![Page 3: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/3.jpg)
![Page 4: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/4.jpg)
![Page 5: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/5.jpg)
![Page 6: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/6.jpg)
![Page 7: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/7.jpg)
![Page 8: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/8.jpg)
![Page 9: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/9.jpg)
![Page 10: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/10.jpg)
![Page 11: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/11.jpg)
Basics
• What is a company?
• Why do companies exist?
• How large should a company be?
![Page 12: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/12.jpg)
Role of Accounting
• The communication problem
- How to condense millions of transactions in a meaningful way
• With whom does it communicate?
- Investors--debt and equity
- Employees--CEO, store manager, inventory managers, other employees
- Taxing authorities--state and local
- Others (government, labor, etc.)
![Page 13: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/13.jpg)
Financial Accounting
• Why do investors need information?
- What to invest in
- Performance of management
• separation of ownership and control
• What kind of information do they need?
- To forecast:
• the amount
• timing
• uncertainty of future cash flows
![Page 14: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/14.jpg)
Investor Communication
• Problem:
- atomistic investors
- diversified investors
• Answer
- generally accepted accounting principles (GAAP)
![Page 15: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/15.jpg)
US GAAP
• Congress
• Securities and Exchange Commission
• Financial Accounting Standards Board
- American Institute of CPAs
- Emerging Issues Task Force, etc.
• IASB may change all that
![Page 16: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/16.jpg)
Basic Statements
• Balance Sheet– net worth
• Income Statement– change in net worth through firm activities
• Statement of Cash Flows– change in cash
• Notes to the Statements• Audit Opinion
![Page 17: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/17.jpg)
Balance Sheet
• Snap shot of the firm at period-end
• Most basic financial statement
- All others derive from it
- Assets
- Liabilities
- Owners’ Equity
![Page 18: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/18.jpg)
Assets = Liabilities + Owners’ Equity
• Assets--provide future benefits to the firm
- cash or expected to provide cash in future
• current--cash, sold or consumed within year
• noncurrent--held for longer periods
![Page 19: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/19.jpg)
![Page 20: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/20.jpg)
• Liabilities--creditor claims
- expected to require future cash outflows
• current--due within a year
• noncurrent--due later• Owners’ Equity-- the residual
- contributed capital
- retained earnings • RE05 = RE04 + NI05 - Dividends05 - Other05
• Other often includes share repurchases
• I’ll put repurchases and other in dividends for now
• Problem 1.22
![Page 21: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/21.jpg)
![Page 22: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/22.jpg)
Income Statement
• Derives from the balance sheet
- change in net assets due to operations
- assets = liabilities + retained earnings + contributed capital
- RE05 = RE04 + NI05 - Dividends05
![Page 23: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/23.jpg)
Net income = Revenue - Expense
• Revenues
- Sales
- Other• Expenses
- Cost of Goods sold: WM—76% of revenues
- Selling, Gen. & Admin: WM—18% of rev.
- Other: WM—0% of rev.
- Income Tax Expense: WM—2% of rev.• Problem 1.19
![Page 24: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/24.jpg)
![Page 25: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/25.jpg)
Statement of Cash Flows
• Derives from the balance sheet
- Explains change in cash = Cash05 – Cash04
- Generally begins with net income
- Sections
• Operating
• Investing
• Financing
• Problem 1-29, 1-34
![Page 26: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/26.jpg)
![Page 27: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/27.jpg)
![Page 28: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/28.jpg)
Other Disclosures
• Notes to the financial statements– accounting policies and details on accounts
• Audit report
• Management’s discussion and analysis
• Segment reporting– geographic and industry segments
• Quarterly results
• Five-year summary
![Page 29: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/29.jpg)
![Page 30: ACCOUNTING ASW SUMMER 2005 Mark Lang. OVERVIEW Overview of ASW - work through syllabus Overview of accounting - goals - structure - major financial statements](https://reader036.vdocuments.us/reader036/viewer/2022081514/56649d5f5503460f94a3fca0/html5/thumbnails/30.jpg)