Part one Fundamentals of Accounting 1 1. Introduction to
Financial Accounting 2. Balance Sheet Concepts :Assets,
Liabilities, and Equities 3.Income Statement Concepts: Income,
Revenues, and Expenses 4.Statement of Cash Flows: Operating,
Investing, and Financial Activities
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Chapter one What Is Accounting? ( 2 ) Objective: Learn what
financial accounting is. Accounting is the gathering and reporting
of a financial history of an organization. Keeping this financial
history is a continual process of capturing financial data,
organizing it into a useful set of accounting records, and issuing
periodic financial reports to users. We will see that accurate, up
to date financial reports contain a great deal of useful
information.
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Framework for Understanding Accounting Information Objective:
Learn what economic information is conveyed in financial
statements. Three things determine the information in accounting
reports : economic concepts, accounting conventions, and
institutional context. 1. Economic concepts are the ideas that
guide the construction of accounting reports. 2. Accounting
conventions are the rules and customs of accounting that help apply
those economic concepts to practical situations. 3. Institutional
context is the environment that shapes the consequences of adopting
special accounting conventions.
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Why Study Accounting? ? Objective: Learn how accounting
information is used and why it is important. Making Many decisions
can be improved with accounting information. Accounting Is More
Than Just Numbers. All users will benefit by being aware of more
than just the numbers and descriptions in the accounting
reports.
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Economic Concepts Objective: Learn a framework for
understanding accounting information. Financial Value The financial
value of an item is the amount of money it would bring if sold.
Wealth An organizations wealth is the sum of the financial values
of all the things it owns. Economic Income An organizations
economic income over a period is the change in its wealth,
excluding capital transactions with its owners.
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Accounting Convention Objective: Learn to read actual financial
statements by looking at excerpts from the reports of real
companies. Nature of Accounting Conventions GAAP Accounting
valuation Recognition Disclosure Factors Affecting Accounting
market richness complexity of transactions form of
organization
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Chapter two 2 In this chapter you will learn: 1.Basic
definitions of assets, liabilities, and equities 2.To analyze
transactions in terms of their effects on balance sheet accounts
3.To use debits, credits, and T-accounts to analyze transactions
and construct balance sheets 4.To begin to read real company
reports
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Basic Definitions and Theory Objective: Learn basic definition
of assets, liabilities, and equities. Assets ( ) is a probable
future economic benefit obtained or controlled by an entity as a
result of a past transaction. Cash Marketable Securities Accounts
Receivable Inventory Prepaid Expenses Deferred Income Taxes
Property, Plant, and Equipment Other Assets Patents, Copyrights,
Trademarks, Licenses
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Basic Definitions and Theory Objective: Learn basic definition
of assets, liabilities, and equities. Liabilities ( ) is a probable
future sacrifice of economic benefits arising from present
obligations of an entity to transfer assets or provide services as
a result of a past transaction or event. Accounts Payable Accrued
Liabilities Short-Term Borrowing Dividends Payable Bonds
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Basic Definitions and Theory Objective: Learn basic definition
of assets, liabilities, and equities. Equities( ) Total equity is
the difference between total assets and total liabilities. Common
Stock Additional Paid-In-Capital Preferred Stock Accounting
Equation ASSETS = LIABILITIES + EQUITY
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T-Accounts, Debits, and Credits Objective: Learn to use debits,
credits, and T- accounts to analyze transactions and construct
balance sheets. Assets Increases Decreases (Dr) (Cr)
Liabilities/Equities Decreases Increases (Dr) (Cr) DEBITS=CREDITS
ASSETS=LIABILITIES+EQUITIES
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Chapter three ( 3 ) In this chapter you will learn: 1.Basic
definition of income, revenue, and expense 2.To analyze
transactions in terms of their effects on income statement accounts
3.To use debits, credits, and t-accounts to analyze transactions
and construct income statements
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Income (Loss) ( ) Objective: Learn basic definitions of income,
revenue, and expense. 1. Income is an increase in a entitys net
assets resulting from its operations over a period of time. If an
entitys operations over a period of time result in a decrease in
its net assets, it has a loss. NET ASSETS=
ASSETS-LIABILITIES=EQUITIES 2. Revenues are increases in net assets
resulting from operations over a period time Recognition is the act
of making an entry into the accounting. 3. Expenses are decreases
in net assets resulting from operations over a period of time.
Matching is the process of making sure all the costs incurred in
generating the revenues recognized in a period are taken as
expenses in that period.
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Chapter four ( 4 ) In this chapter you will learn: 1.The basic
definition of cash 2.To understand the relation between net income
and cash flow from operations 3.To distinguish cash flows from
investing, financing, and operating activities 4.Two methods for
constructing cash flow statements (the direct and indirect methods)
Cash Flow Statements
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Cash( ) Cash is readily transferable value Different forms of
cash : Currency Checking accounts
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Investing activities ( ) Investing activities are actions aimed
at acquiring and disposing of assets that generate a financial
return over a long period of time
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Financing Activities ( ) Financial activities are actions aimed
at acquiring and repaying funds to be used over a long period of
time.
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Operating Activities ( ) Operating activities are actions that
are neither investing nor financing activities.
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Methods of Deriving Cash Flow Statement Objective: Learn two
methods for constructing cash flow statements (the direct and
indirect methods). Direct Method The direct method of presenting
cash flows statements presents cash flows from operations in terms
of their uses and sources. Indirect Method The indirect method of
presenting cash flows from operations shows how net income must be
adjusted to get back to cash flows.
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Part two 2 Valuation Basics and Accounting 5. Economic
Concepts: Behind the Accounting Numbers 6. Financial Statement
Analysis: Connecting Economic Concepts to Accounting Reports
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Cash flows and Economic Value ( ) Objective: Learn to
understand the role of cash flow in determining economic value Cash
is king. Economic value of an assets is determined by the cash
flows and the cash flow will generate.
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Cash flows over time: The Time Value of Money Objective: Learn
how to compute compound interest Present Value Future Value
Uncertain Cash Flows: Expected Value Time and Uncertainty:
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Chapter six ( 6 : ) In this chapter you will learn: 1. How
stock markets provide estimates of the economic values of firms. 2.
What financial statement analysis is and begin to develop a
conceptual framework for it. 3. Two basic ratios useful in
financial analysis Financial Statement Analysis: Connecting
Economic Concepts to Accounting Reports
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Alternative Measures of Value: Alternative Measures of Value: A
Framework for Financial statement Analysis 1.The Value of a firm in
the Stock Market 2.GAAP Valuation 3.Financial Statement Analysis
4.Conceptual Framework for Financial Statement Analysis
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Part three 3 ) Topics in Financial Reporting 7.Accounts
Receivable 8.Inventories 9.Marketable Securities 10.Long-lived
Assets 11.Long-term Liabilities 12.Equities 13.Income Taxes 14.
Financial Statement Analysis and the Valuation of Common Stock
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Chapter seven ( 7 ) In this chapter you will learn: 1.To
understand the definition of accounts receivable 2.To analyze the
economic value of accounts receivable
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Accounts Receivable Nature of Accounts Receivable Economic
Value of Accounts Receivable GAAP for Accounts Receivable
Determining Bad Debt Expense and the Allowance for Bad Debts
Financial Statement Analysis of Accounts Receivable
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Chapter eight ( 8 ) In this chapter you will learn: 1.To
understand the definition of inventories 2.To analyze the economic
value of inventories.
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Inventories Nature of Inventories Economic Value of Inventories
GAAP for Inventories Financial Statement Analysis of Inventory
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Chapter nine ( 9 ) In this chapter you will learn: 1.To
understand the definition of marketable securities 2.To analyze the
economic value of marketable securities
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Marketable Securities Nature of Marketable Securities Economic
value of Marketable Securities GAAP for Marketable Securities
Financial Statement Analysis of Marketable Securities
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Chapter ten ( 10 ) In this chapter you will learn: 1.To
understand the definition of tangible and intangible long-lived
assets 2.To analyze the economic value of long- lived assets
Long-Lived Assets
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Long-Lived Assets Nature of Long-Lived Assets Economic value of
Long-Lived Assets GAAP for Long-Lived Assets Financial Statement
Analysis of Long- Lived Assets
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Chapter eleven ( 11 ) In this chapter you will learn: 1.To
understand the definition of long-term liabilities 2.To analyze the
economic value of long-term liabilities Long-Term Liabilities
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Long-Term Liabilities Nature of Long-Term Liabilities Economic
value of Long-Term Liabilities GAAP for Long-Term Liabilities
Financial Statement Analysis of Long-Term Liabilities
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Chapter twelve ( 12 ) In this chapter you will learn: 1.To
understand the nature and function of equities 2.To understand more
about the distinction between debt and equities 3.To discuss the
economic value of common stock equities
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Nature of Equities Economic value of Equities GAAP for Equities
Financial Statement Analysis of Equities
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Chapter thirteen ( 13 ) In this chapter you will learn: 1To
understand the nature and function of income taxes 2To analyze how
income taxes impact the economic value of a firms assets and
liabilities
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Income Taxes Nature of Income Taxes Tax Accounting Principles
Depreciation Assets Impairments Economic Value of Deferred Income
Taxes GAAP for Deferred Income Taxes
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Chapter fourteen ( 14 ) In this chapter you will learn: 1.To
use your knowledge of accounting in analyzing financial reports
2.To use accounting fundamentals to forecast future cash flows 3.To
use projections of future cash flows to estimate the value of a
company
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Financial Statement Analysis and the Valuation of Common Stock
Valuation of a company using discounted cash flow analysis
Time-series benchmarks Current Ratio Quick Ratio Debt-to-Equity
Long-Term Debt-to-Equity Cross-Sectional Benchmarks
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Explanation This material was based on the book Financial
Accounting (written by Rick Antle and Stanley J. Garstka, Tsinghua
University Press). The students taking this course should have
finished learning Fundamental Accounting and Financial Accounting
(Chinese version).