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Lecture Notes For Accounting Principles, 13th Edition

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Lecture Notes For Accounting Principles, 13th Edition - Page 1 preview imageCopyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’s Manual(For Instructor Use Only)1-1CHAPTER 1ACCOUNTING IN ACTIONLEARNING OBJECTIVES1.IDENTIFY THEACTIVITIES ANDUSERSASSOCIATEDWITHACCOUNTING.2.EXPLAINTHE BUILDING BLOCKS OF ACCOUNTING:ETHICS,PRINCIPLES, AND ASSUMPTIONS.3.STATE THE ACCOUNTING EQUATION, AND DEFINEITS COMPONENTS.4.ANALYZE THE EFFECTS OF BUSINESSTRANSACTIONSON THE ACCOUNTING EQUATION.5.DESCRIBETHE FOUR FINANCIAL STATEMENTS ANDHOW THEY ARE PREPARED.*6.EXPLAIN THE CAREER OPPORTUNITIES IN ACCOUNTING.
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Lecture Notes For Accounting Principles, 13th Edition - Page 2 preview image
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Lecture Notes For Accounting Principles, 13th Edition - Page 3 preview image1-2Copyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’sManual(For Instructor Use Only)CHAPTER REVIEWAccounting Defined1.(L.O.1)Accountingis an information system that identifies, records, and communicates theeconomic events of an organization to interested users.a.The first part of the process,identifying,involves selecting those events that are consideredevidence of economic activity relevant to a particular business organization.b.Recordingis the keeping of a chronological diary of events, measured in dollars and cents.c.Communicationoccurs through the preparation and distribution of accounting reports.2.The accounting process consists of:IdentificationRecordingCommunication.3.Internal usersof accounting information are managers who plan, organize, and run a business.These include marketing managers, production supervisors, finance directors, and companyofficers.4.External usersinclude investors, creditors, taxing authorities, regulatory agencies, labor unions,and customers.Ethics5.(L.O. 2)The standards of conduct by which one’s actions are judged as right or wrong, honestor dishonest, fair or not fair, areethics.The process of analyzing ethics cases and situations is torecognize an ethical situation and the ethical issues involved, identify and analyze the principalelements in the situation (especially those harmed or benefited), identify the alternatives andweigh the impact of each alternative on various stakeholders, then select the most ethicalalternative.GAAP and Measurement Principles6.Generally accepted accounting principles(GAAP) are a common set of guidelines (standards)used by accountants.7.TheSecuritiesandExchangeCommission(SEC)istheagencyoftheUnitedStatesgovernment that oversees U.S financial markets and accounting standard-setting bodies.8.TheFinancial Accounting Standards Board(FASB) is the primary accounting standard-settingbody in the United States. Many countries outside of the U.S. have adopted the accountingstandards issued by the International Accounting Standards Board (IASB).9.Thehistoricalcost principlerequires that companies record assets at their cost. The fair valueprinciple states that assets and liabilities should be reported at fair value (the price received to sellan asset or settle a liability).
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Lecture Notes For Accounting Principles, 13th Edition - Page 4 preview imageCopyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’s Manual(For Instructor Use Only)1-3The Monetary Unit and Economic Entity Assumptions10.The accounting profession has developed certain assumptions thatare generally accepted anduniversally practiced.a.Themonetary unit assumptionrequires that only transaction data that can be expressed inmoney terms be included in the accounting records.b.Theeconomic entity assumptionrequires that the activities of the entity be kept separateand distinct from the activities of its owner and all other economic entities.Business Enterprises11.Three types of business enterprises are proprietorships, partnerships, and corporations.a.Aproprietorshipis a business owned by one person.b.Apartnershipis a business owned by two or more persons associated as partners.c.Acorporationis a business organized as a separate legal entity under state corporation lawwith ownership divided into transferable shares of stock.The Accounting Equation12.(L.O.3)Thebasic accounting equationis:Assets = Liabilities + Owner’s Equity.The accounting equation applies to all economic entities regardless of size, nature of business, orform of business organization.13.The key components of the basic accountingequation are:a.Assetsare resourcesa business owns.b.Liabilitiesarecreditors’claimson totalassets.c.Owner’s equityis theownershipclaimon total assets.14.In proprietorships, there are foursubdivisionsof owner’s equity:a.Investments by Ownerare the assets put in the business by the owner.b.Revenuesare the gross increase in owner’s equity resulting from business activities enteredinto for the purpose of earning income.c.Drawingsare withdrawals of cash or other assets by the owner for personal use.d.Expensesare the cost of assets consumed or services used in the process of earningrevenue.15.Revenues and expenses determine if anet incomeornet lossoccurs as follows:a.Revenues > Expenses = Net Income.b.Revenues < Expenses = Net Loss.
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Lecture Notes For Accounting Principles, 13th Edition - Page 5 preview image1-4Copyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’sManual(For Instructor Use Only)Transactions16.(L.O.4)Transactionsare the economic events of the business recorded by accountants.Transactions may be external or internal transactions.17.Each transaction must be analyzedin terms ofits effect on the components ofthe basicaccounting equation. The analysis must also identify the specific items affected and the amount ofthe change in each item.18.Each transactionmust havea dual effect on the equation. For example, if an individual asset isincreased, there must be a corresponding:a.decrease in another asset, orb.increase in a specific liability, orc.increase in owner’s equity.19.A tabular summary may be prepared to show the cumulative effect of transactions on the basicaccounting equation. The summary demonstrates that:a.Each transactionisanalyzed in terms of its effect on (1) the three components of thebasicaccountingequation and (2) specific types(kinds)of items within each component.b.The two sides of the equation must always be equal.c.The Owner’s Capital, Owner’s Drawings, Revenues, and Expenses columns indicate thecauses of each change in the owner’s claim on assets.The Financial Statements20.(L.O.5)Four financial statements are prepared from the summarized accounting data:a.Anincome statementpresents the revenues and expenses and resulting net income or netloss for a specific period of time.b.Anowner’s equity statementsummarizes the changes in owner’s equity for a specificperiod of time.c.Abalance sheetreports the assets, liabilities, and owner’s equity at a specific date.d.Astatement of cash flowssummarizes informationaboutthe cash inflows (receipts) andoutflows (payments) for a specific period of time.21.The financial statements areinterrelatedbecause:a.Net income (or net loss)on the income statement is added (subtracted) to (from) thebeginning balance of owner’s capital in the owner’s equity statement.b.Owner’s capital at the end of the reporting period shown in the owner’s equity statement isreportedonthe balance sheet.c.The amount of cash on the balance sheet is reported on the statement of cash flows.22.In the income statement, revenues are listed first, followed by expenses.Below expenses is theresulting amount of net income (or net loss).23.The owner’s equity statement shows the owner’s capital at the beginning of the period, additionalinvestments, net income (or net loss) for the period, owner’s drawings, and the owner’s capital atthe end of the period.24.In the balance sheet, assets are listed at the top, followed by liabilities and owner’s equity.25.The statement of cash flows reports the sources, uses, and net increase or decrease in cash.Chapter 17 will examine in detail how the statement is prepared.
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Lecture Notes For Accounting Principles, 13th Edition - Page 6 preview imageCopyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’s Manual(For Instructor Use Only)1-5*Careers in Accounting*26.(L.O.6)Publicaccountingprovidestheservicesofauditing,taxation,and managementconsulting.a.Auditinginvolves examining financial statements of companies and expressing an opinionas to the fairness of their presentation.b.Taxationincludes providing tax advice and planning, preparing tax returns, and representingclients before governmental agencies.c.Managementconsultinginvolvesprovidingadviceformanagersonsuchmattersasfinancial planning and control and the development of computer systems.*27.Private accountinginvolves the employment of accountants within individual companies. Theprivate accountant performs a wide variety of duties such as general accounting, cost accounting,budgeting, accounting information systems, tax accounting, and internal auditing.*28.Opportunities in government are other options available such as employment with the InternalRevenue Service (IRS), Federal Bureau of Investigation (FBI) and the Securities and ExchangeCommission (SEC).*29.Forensic accounting uses accounting, auditing, and investigative skills to conduct investigationsinto theft and fraud.
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Lecture Notes For Accounting Principles, 13th Edition - Page 7 preview image1-6Copyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’sManual(For Instructor Use Only)LECTURE OUTLINEA.What Accounting Is.1.Accounting consists of three basic activities—it identifies, records, andcommunicates the economic events of an organization to interestedusers.2.Once a company identifies economic events, it records those events inorder to provide a history of its financial activities. Recordingconsists ofkeeping a systematic, chronological diary of events, measuredin dollarsand cents.3.A company communicates the collected information to interested usersby means of accounting reports which are called financial statements.4.A vital element in communicating economic events is the accountant’sability to analyze and interpret the reported information. Interpretation in-volvesexplaining the uses, meaning, and limitations of reported data.5.Bookkeeping usually involves only the recording of economic events and istherefore just one part of the accounting process. Accounting involves theentire process of identifying, recording, and communicating economic events.B.Users and Uses of Accounting.1.Internalusersofaccountinginformationaremanagerswhoplan,organize,andrunabusiness.Theseincludemarketingmanagers,production supervisors, finance directors, and company officers.
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Lecture Notes For Accounting Principles, 13th Edition - Page 8 preview imageCopyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’s Manual(For Instructor Use Only)1-72.External users are individuals and organizations outside of a companywho are either:a.Investors or creditors: Investors (owners) use accounting informationtomakedecisionstobuy,hold,orsellownershipsharesofacompany.Creditors(suppliersandbankers)useaccountinginformationtoevaluatetherisksofgrantingcreditorlendingmoney.b.Other external users: This includes taxing authorities (Internal RevenueService), regulatory agencies (Securities and Exchange Commission),customers, and labor unions.ACCOUNTING ACROSS THE ORGANIZATIONAccounting can serve as a useful recruiting tool even for the human resourcesdepartment. One company’s website includes the following: “operating resultsare postedand monthly group meetings inform allemployees about what’shappening in the company.”What are the benefits to the company and to the employees of making thefinancial statements available to all employees?Answer:If employees can read and use financial reports, a company will benefitin thefollowing ways. Themarketing departmentwill make betterdecisions about products to offer and prices to charge. Thefinancedepartmentwill make better decisions about debt and equity financingand how much to distribute in dividends. Theproduction departmentwill make better decisions about when to buy new equipment and howmuch inventory to produce. Thehuman resources departmentwill bebetter ableto determine whether employees can be given raises.Finally,all employeeswill be better informed about the basis on whichthey are evaluated, which will increase employee morale.C.Ethics in Financial Reporting.1.Ethics are the standards of conduct by which one’s actions are judgedas right or wrong, honest or dishonest, fair or not fair. Effective financialreporting depends on sound ethical behavior.
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Lecture Notes For Accounting Principles, 13th Edition - Page 9 preview image1-8Copyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’sManual(For Instructor Use Only)2.In the process of analyzing ethics cases and situations, the followingsteps should be applied:a.Recognize an ethical situation and the ethical issues involved.b.Identify and analyze the principal elements in the situation.c.Identify the alternatives, and weigh the impact of each alternativeon various stakeholders.D.Generally Accepted Accounting Principles.1.Generallyacceptedaccountingprinciplesareacommonsetofstandards used by accountants.2.Two organizations are primarily responsible for establishing generallyaccepted accounting principles.a.The Financial Accounting Standards Board (FASB) is the primaryaccounting standard–setting body in the United States.b.The Securities and Exchange Commission (SEC) isthe agency thatoversees U.S. financial markets and accounting standard-settingbodies.c.Many countries outside of the U.S. have adopted the accountingstandards issued by the International Accounting Standards Board(IASB).3.The historical cost principle (or cost principle) dictates that companiesshould record assets at their cost. This is also true over the time theasset is held.4.Thefairvalueprinciplestatesthatassetsandliabilitiesshouldbereported at fair value (the price received to sell an asset or settle aliability).
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Lecture Notes For Accounting Principles, 13th Edition - Page 10 preview imageCopyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’s Manual(For Instructor Use Only)1-9E.Assumptions.1.Monetary unit assumption.a.Requires that companies include in the accounting records only trans-action data that can be expressed in money terms. This assumptionenables accounting to quantify (measure) economic events.b.The monetary unit assumption is vital to applying the historical costprinciple.2.Economic entity assumption requires that the activities of the entity be keptseparate and distinct from the activities of its owner and all other economicentities.a.A business owned by one person is generally a proprietorship.b.A business owned by two or more persons associated as partnersis a partnership.c.A business organized as a separate legal entity under state corpo-ration law and having ownership divided into transferable shares ofstock is a corporation.ACCOUNTING ACROSS THE ORGANIZATIONThe study of accounting should help students a great deal, because a workingknowledge of accounting is desirable for virtually every field of business.How might accounting help a student?Answer:You will need to understand financial reports in any enterprise withwhich you are associated. Whether you become a manager, adoctor,a lawyer, a social worker, a teacher, an engineer, an architect, or anentrepreneur, a working knowledge of accounting is relevant.
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Lecture Notes For Accounting Principles, 13th Edition - Page 11 preview image1-10Copyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’sManual(For Instructor Use Only)F.The Basic Accounting Equation.1.Assets = Liabilities + Owner’s Equity.2.Equality of the equation must be preserved.3.The expanded accounting equation is:Assets = Liabilities + Owner’s Capital–Owner’s Drawings + Revenues–Expenses.G.Assets, Liabilities, and Owner’s Equity.1.Assets are resources a business owns. The business uses its assets incarrying out such activities as production and sales.2.Liabilities are claims against assets. They are existing debts and obligations.3.Owner’s equity is equal to total assets minus total liabilities; owner’sequity represents the ownership claim on total assets. The principalsubdi-visions of owner’s equity are capital, drawings, revenues, and expenses.a.Capital is the owner’s investment in the business.b.Drawings are the withdrawal of cash or other assets from a proprie-torship for the personal use of the owner(s).4.Revenues are the gross increase in owner’s equity resulting from businessactivities entered into for the purpose of earning income.5.Expenses are the cost of assets consumed or services used in the processof earning revenue.
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Lecture Notes For Accounting Principles, 13th Edition - Page 12 preview imageCopyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’s Manual(For Instructor Use Only)1-11H.Using the Accounting Equation.1.External transactions are economic events between the company andsome outside enterprise.2.Internal transactions are economic events that occur entirely within onecompany.3.Each transaction must have a dual effect on the accounting equation.I.Financial Statements.1.An income statement presents the revenues and expenses and resultingnet income or net loss for a specific period of time.2.An owner’s equity statement summarizes the changes in owner’s equityfor a specific period of time.3.A balance sheet reports the assets, liabilities, and owner’s equity at aspecific date.4.A statement of cash flows summarizes information about the cash inflows(receipts) and outflows (payments) for a specific period of time.
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Lecture Notes For Accounting Principles, 13th Edition - Page 13 preview image1-12Copyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’sManual(For Instructor Use Only)*J.Accounting Career Opportunities.1.Individuals in public accounting offer expert service to the general publicthrough the services they perform.a.Auditing—A certified public accountant (CPA) examines companyfinancial statements and provides an opinion as to how accuratelythe financial statements present the company’s results and financialposition.b.Taxation—Tax specialists provide tax advice and planning, preparetax returns, and represent clients before governmental agencies.c.Management Consulting—Management consultants assist in theinstallation of basic accounting software and perform support servicesfor major marketing projects and merger and acquisition activities.2.Private accountants are employees of a for-profit company and are involvedin a number of activities including cost accounting, tax planning and prepa-ration, accounting information system design and support, and internalauditing.3.GovernmentalaccountingopportunitiesincludeemploymentwiththeInternalRevenueService,FederalBureauofInvestigation,andtheSecurities and Exchange Commission.
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Lecture Notes For Accounting Principles, 13th Edition - Page 14 preview imageCopyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’s Manual(For Instructor Use Only)1-13A Look at IFRSMost agree that there is a need for one set of international accounting standards. Here is why:Multinational corporations.Today’s companies view the entire world as their market. Forexample, Coca-Cola, Intel, and McDonald’s generate more than 50% of their sales outside theUnited States.Many foreign companies, such as Toyota, Nestlé, and Sony, find their largestmarket to be the United States.Mergers and acquisitions.The mergers between Fiat/Chrysler and Vodafone/Mannesmannsuggest that we will see even more such business combinationsof companies from differentcountriesin the future.Information technology.As communication barriers continue to topple through advances intechnology, companies and individuals in different countries and markets are becoming morecomfortable buying and selling goods and services from one another.Financial markets.Financial markets are of international significance today. Whether it iscurrency, equity securities (stocks), bonds, or derivatives, there are active markets throughoutthe world trading these types of instruments.KEY POINTSFollowing are the key similarities and differences between GAAP and IRS asrelated to accounting fundamentals.The basic techniques for recording business transactions are the same for U.S. andinternational companies.Both international and U.S. accounting standards emphasize transparency in financialreporting. Both sets of standards are primarily driven by meeting the needs of investorsand creditors.The three most common forms of business organizations, proprietorships, partnerships,andcorporations,arealsofoundincountriesthatuseinternationalaccountingstandards.
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Lecture Notes For Accounting Principles, 13th Edition - Page 15 preview image1-14Copyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’sManual(For Instructor Use Only)International standards are referred to as International Financial Reporting Standards(IFRS),developedbytheInternationalAccountingStandardsBoard.AccountingstandardsintheUnitedStatesarereferredtoasgenerallyacceptedaccountingprinciples (GAAP), and are developed by the Financial Accounting Standards Board.IFRS tends to be simpler in its accounting and disclosure requirements; some peoplesay it is more “principles-based.” GAAP is more detailed; some people say it is more“rules-based.”The internal control standards applicable to Sarbanes-Oxley (SOX) apply only to largepublic companies listed on U.S. exchanges. There is a continuing debate as to whethernon-U.S. companies should have to comply with this extra layer of regulation.LOOKING TO THE FUTUREBoth the IASB and the FASB are hard at work developing standards that will lead to theelimination of major differences in the way certain transactions are accounted for and reported.
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Lecture Notes For Accounting Principles, 13th Edition - Page 16 preview imageCopyright © 2018WILEYWeygandt,Accounting Principles,13/e,Instructor’s Manual(For Instructor Use Only)2-1CHAPTER 2LEARNING OBJECTIVES1.DESCRIBE HOW ACCOUNTS, DEBITS, AND CREDITSARE USED TO RECORD BUSINESS TRANSACTIONS.2.INDICATEHOWAJOURNALISUSEDINTHERECORDING PROCESS.3.EXPLAINHOWA LEDGER ANDPOSTINGHELP INTHE RECORDING PROCESS.4.PREPARE A TRIAL BALANCE.
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Accounting Principles by Carl S. Wa...

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