1. THE BASIC FRAMEWORK Chapter 1 PERAKAUNAN AWALAN PAF1013

2. THE MOST IMPORTANT THING IN LIFE IS FREE INSPIRASI HARI INI

4. CLASSIFYING AND SUMMARISING iii. Data being organized so as to be most useful to the business. -so as it will be possible to work out how much profit or loss has been made by the business. - possible to show what resources are owned, what resources are owned by the business . COMMUNICATING INFORMATION iv. Be able to tell whether or not the business is performing well financially -able to ascertain the strengths and weaknesses of the business.

6. What is Accounting? Three Activities LO 1 Explain what accounting is. Illustration 1-1 Accounting process The accounting process includes the bookkeeping function.

9. Who Uses Accounting Data? Management Common Questions Human Resources IRS Labor Unions SEC Marketing Finance Investors Creditors LO 2 Identify the users and uses of accounting. Customers Internal Users External Users

13. Liabilities iii. If people other than the owner have supplied asset we call it as liabilities . Means liabilities is the amount business owe for these assets.

14. The Basic Accounting Equation Assets Liabilities Owners’ Equity = + Provides the underlying framework for recording and summarizing economic events. Assets are claimed by either creditors or owners. Claims of creditors must be paid before ownership claims. LO 6 State the accounting equation, and define assets, liabilities, and owner’s equity.

18. Owners’ Equity Revenues result from business activities entered into for the purpose of earning income. Common sources of revenue are: sales, fees, services, commissions, interest, dividends, royalties, and rent. Illustration 1-6 LO 6 State the accounting equation, and define assets, liabilities, and owner’s equity.

19. Owners’ Equity Expenses are the cost of assets consumed or services used in the process of earning revenue. Common expenses are: salaries expense, rent expense, utilities expense, tax expense, etc. Illustration 1-6 LO 6 State the accounting equation, and define assets, liabilities, and owner’s equity.

21. Transactions (Problem) P1-1A: Barone’s Repair Shop was started on May 1 by Nancy. Prepare a tabular analysis of the following transactions for the month of May. +10,000 1. +10,000 Cash Accounts Receivable Equipment Accounts Payable Barone, Capital LO 7 Analyze the effects of business transactions on the accounting equation. + + = + 1. Invested $10,000 cash to start the repair shop. Investment Assets Liabilities Equity

22. Transactions (Problem) +10,000 1. +10,000 Cash Accounts Receivable Equipment Accounts Payable Barone, Capital LO 7 Analyze the effects of business transactions on the accounting equation. 2. Purchased equipment for $5,000 cash. -5,000 2. +5,000 + + = + Investment Assets Liabilities Equity

23. Transactions (Problem) +10,000 1. +10,000 Cash Accounts Receivable Equipment Accounts Payable LO 7 Analyze the effects of business transactions on the accounting equation. 3. Paid $400 cash for May office rent. -5,000 2. +5,000 + + = + -400 3. -400 Expense Barone, Capital Investment Assets Liabilities Equity

24. Transactions (Problem) +10,000 1. +10,000 Cash Accounts Receivable Equipment Accounts Payable LO 7 Analyze the effects of business transactions on the accounting equation. 4. Received $5,100 from customers for repair service. -5,000 2. +5,000 + + = + -400 3. -400 Expense +5,100 4. +5,100 Revenue Barone, Capital Investment Assets Liabilities Equity

25. Transactions (Problem) +10,000 1. +10,000 Cash Accounts Receivable Equipment Accounts Payable LO 7 Analyze the effects of business transactions on the accounting equation. 5. Withdrew $1,000 cash for personal use. -5,000 2. +5,000 + + = + -400 3. -400 Expense +5,100 4. +5,100 Revenue -1,000 5. -1,000 Drawings Barone, Capital Investment Assets Liabilities Equity

26. Transactions (Problem) +10,000 1. +10,000 Cash Accounts Receivable Equipment Accounts Payable LO 7 Analyze the effects of business transactions on the accounting equation. 6. Paid part-time employee salaries of $2,000. -5,000 2. +5,000 + + = + -400 3. -400 Expense +5,100 4. +5,100 Revenue -1,000 5. -1,000 Drawings -2,000 6. -2,000 Expense Barone, Capital Investment Assets Liabilities Equity

27. Transactions (Problem) +10,000 1. +10,000 Cash Accounts Receivable Equipment Accounts Payable LO 7 Analyze the effects of business transactions on the accounting equation. 7. Incurred $250 of advertising costs, on account. -5,000 2. +5,000 + + = + -400 3. -400 Expense +5,100 4. +5,100 Revenue -1,000 5. -1,000 Drawings -2,000 6. -2,000 Expense +250 7. -250 Expense Barone, Capital Investment Assets Liabilities Equity

28. Transactions (Problem) +10,000 1. +10,000 Cash Accounts Receivable Equipment Accounts Payable LO 7 Analyze the effects of business transactions on the accounting equation. 8. Provided $750 of repair services on account. -5,000 2. +5,000 + + = + -400 3. -400 Expense +5,100 4. +5,100 Revenue -1,000 5. -1,000 Drawings -2,000 6. -2,000 Expense +250 7. -250 Expense +750 8. +750 Revenue Barone, Capital Investment Assets Liabilities Equity

29. Transactions (Problem) +10,000 1. +10,000 Cash Accounts Receivable Equipment Accounts Payable LO 7 Analyze the effects of business transactions on the accounting equation. 9. Collected $120 cash for services previously billed. -5,000 2. +5,000 + + = + -400 3. -400 Expense +5,100 4. +5,100 Revenue -1,000 5. -1,000 Drawings -2,000 6. -2,000 Expense +250 7. -250 Expense +750 8. +750 Revenue +120 9. -120 Barone, Capital Investment Assets Liabilities Equity 6,820 + 630 + 5,000 = 250 + 12,200

31. EQUALITY OF THE ACCOUNTING EQUATION Each side added equally. A plus and a minus both on the assets side cancelling out each other. Each side has equal additions. A plus and a minus both on the assets side cancelling out each other. A plus and a minus both on the assets side cancelling out each other. Each side has equal deductions. A plus and a minus both on the assets side cancelling out each other. + + - + + - + + - + - - + - 1 2 3 4 5 6 7 Effects on balance sheet totals Capital and liabilities Assets Number of transaction as above

32. Increase capital Increase asset (stock of goods) Increase liability (creditor) Increase asset (debtors) Increase asset (bank) Decrease liability (creditor) Decrease asset (debtors) Increase asset (bank) Decrease asset (bank) Increase asset (stock of goods) Decrease asset (stock of goods) Decrease asset (stock of goods) Decrease asset (bank) Increase asset (bank) 1. Owner pays capital into the bank 2. Buy goods by cheque. 3.Buy goods on credit 4. Sale of goods on credits 5.Sale of goods for cash (cheque) 6. Pay creditor 7.Debtors pays money oeing by cheque. Effect Effect Example of transaction

33. Financial Statements Companies prepare four financial statements from the summarized accounting data: Balance Sheet Income Statement Statement of Cash Flows Owners’ Equity Statement LO 8 Understand the four financial statements and how they are prepared.

36. The introduction of capital B Blake Balance Sheet as at 1 May 20x7 Assets RM Cash at bank 5,000 Capital 5,000

38. The purchase of an asset by cheque B Blake Balance Sheet as at 3 May 20x7 Assets RM Building 3,000 Cash at bank 2,000 5,000 Capital 5,000

40. The purchase of an asset and the incurring of a liability B Blake Balance Sheet as at 6 May 20x7 Assets RM Building 3,000 Stock of goods 500 Cash at bank 2,000 Capital 5,500 Less: creditor ( 500) 5,000 Capital 5,000

41. End – Chapter 1