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Using Accounting Information. Business Planning Activities. Individual Point of View Business Point of View Planning Budgeting. Accounting Information System. Resources and procedures in a business. Accounting Information System.

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Presentation Transcript

Business planning activities
Business Planning Activities

  • Individual Point of View

  • Business Point of View

    • Planning

    • Budgeting


Accounting information system
Accounting Information System

Resources and procedures in a business


Accounting information system1
Accounting Information System

Resources and procedures in a business that change economic data


Accounting information system2
Accounting Information System

Resources and procedures in a business that change economic data into financial information


Users of accounting information
Users of Accounting Information

  • Owners

  • Lenders

  • Labor Organizations

  • Customers

  • Society groups

  • Government Regulatory Agencies


Entity concept
Entity Concept

Any organization unit for which we gather and process


Entity concept1
Entity Concept

Any organization unit for which we gather and process financial and economic data


Entity concept2
Entity Concept

Any organization unit for which we gather and process financial and economic data for the purpose of decision making


Types of ownership
Types of Ownership

  • Single proprietorship

  • Partnership

  • Corporation


Financial statements
Financial Statements

  • Balance Sheet

  • Income Statement

  • Statement of Cash Flows


Balance sheet
Balance Sheet

  • Summarizes assets, liabilities, and owners’ equities as of a specific moment in time

    • Assets - economic resources or items of value a business owns

    • Liabilities - claims against the assets by nonowners

    • Owners’ equity - claims against the assets by owners


Basic accounting equation
Basic Accounting Equation

Assets = Liabilities + Owners’ Equity


Income statement
Income Statement

  • Presents the results of operations for a period of time

    • Revenues - inflow of assets from performing services or selling goods

    • Expenses - use of assets or incurrence of liabilities when earning revenues


Statement of cash flows
Statement of Cash Flows

  • Presents the reasons why cash on the balance sheet changed from one date to another

  • Presents cash flows from

    • Operating activities

    • Investing activities

    • Financing activities


Published annual reports
Published Annual Reports

  • Letter to stockholders

  • Management’s discussion and analysis

  • Financial statements and notes

  • The report of the independent accountant


Analyzing information
Analyzing Information

  • Common-size statement

    • Express each item as a percent of the total for that statement

      • Balance sheet - total assets

      • Income statement - total revenues


Balance sheet analysis
Balance Sheet Analysis

  • Are total assets higher or lower?

  • What is percent change in total assets?

  • Is the percent of total liabilities to total liabilities plus owner’s equity increasing or decreasing?


Income statement analysis
Income Statement Analysis

  • Are revenues higher or lower?

  • What is the precentage change in total revenues?

  • Is the percentage of total expenses to total revenues increasing or decreasing?


Integrative analysis
Integrative Analysis

  • Is the business operating efficiently by using the least amount of asset investment to generate a given level of total revenues?

  • Calculate Total Asset Turnover

    • Total revenues

    • divided by

    • Average total assets


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