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Welcome to AccountingCHAPTER 1

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What is accounting and what am I doing here?

CHAPTER 1

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Grading

Assignment % of grade

Mid-term 1 30%

Mid-term 2 30%

Homework, including cases

15%

BIP 260 Group Project 25%

Total 100%

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Grading

Final weighted score

Grade

93+ A

90-92.99 A-

87-89.99 B+

83-86.99 B

80-82.99 B-

77-79.99 C+

73-76.99 C

70-72.99 C-

60-69.99 D

Below 60 F

If you are on the border of a grade, being a good course contributor (participation, attendance, timeliness) may help.

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How to get an A

Be engaged in class and take good notes

Do all the practice problems

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Classroom information

Be engaged for the full class Be here on time Please don’t walk in and out of class Attendance taken – sign in as you arrive No computers Use your name plate Active learning – be prepared to think in class

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Advice from former students

Make sure you know how to use to Excel. It really helps you organize your ratios and helps with the calculations.”

“To do well you need to do the practice problems”

“Take the time to really understand the concepts because this information is so relevant to every aspect of business and you will most likely have few other opportunities at NU to obtain this type of business sense.”

“Take good notes in class! This is key to prepare for the exams.”

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This course is about

Getting you ready for the real world

Increasing your financial literacy

Becoming familiar and comfortable with the income statement and balance sheet

Understanding what the financial statements do NOT tell you

Learning to use financial information to make decisions

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This course is not

Meant to turn you into an accountant

About obscure accounting rules

About how to fill out tax forms

Only for people going into business organizations

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BIP Project

Pull together all your learning in this class

Makes you stand out in interview process

Prepares you for career

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BIP Project

Four or five students on a team Analyze a US based company TAs will help you get needed info Wednesday Use discussion board to post company selection Compare company to a competitor Everyone works on all sections Confidential peer evaluations Carefully review project description

Important TA SESSION Wednesday

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Online homework assignments and extra practiceHints to help you solve problemsCheck your work as you goGreat way to learn and prepare for examsFigure out what you need to study

PLEASE do not just guess! Use this as an opportunity to learn

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If you forget to submit by 11:59 am (one minute before noon) on due date, the system will submit whatever is done by that time.

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Accounting requires practice

Practice sets on Connect

“Like Homework” sets on Connect

Book Website : www.mhhe.com/marshall10e

Answers to odd number problems in book

Practice quizzes

Additional study resources

Multiple Choice and Matching at end of chapter in book – see suggested items under Practice Resources on Canvas

Robin and the TAs

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Why Accounting?

Business Business success measured based on

it

Language of business

Tells you how to improve your business

You will need to negotiate with the finance people

Use information from financial statements to make decisions

Your bonus might depend on it

Not For Profit Build plans for organization

Language of organizations

Find ways to save money

You will need to negotiate with the finance people

Understand your donors

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Ever used a financial statement?

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Types of Accounting

FINANCIAL

MANAGERIAL

AUDITING

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Who uses accounting information?

User Decision/Informed Judgment MadeManagement Planning, directing and controllingInvestors/Shareholders Assessing amounts, timing, and

uncertainty of future cash returns on their investment

Creditors/Suppliers Assessing probability of collection and the risk of late (or non-) payment

Employees Planning for retirement and future job prospects

Securities and Exchange Commission

Reviewing for compliance of all required information

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Financial Accounting

The preparation and reporting of financial statements for an entity. External orientation

Historical results

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Managerial Accounting

The use of economic and financial information to plan and control many of the activities of the entity and to support the management decision-making process.

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Auditing

Public accounting firms and individual Certified Public Accountants (CPAs) provide auditing services and issue an independent auditor’s report.

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History of Accounting

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History of Accounting

3000 B.C. 1494 1800’s 1900’s

Tax receipts on clay tablets

Double entry bookkeeping

Industrial Revolution

“Organized” Accounting

1929

Stock Market Crash

261929 Stock Market CrashFew Accounting Rules

• Crash provoked concern about financial disclosure

• Some alleged crash was due to inadequate financial information

• Securities Act of 1933 designed to protect investors from abuses in financial reporting and regulate initial offering and sale of securities in interstate commerce

27Securities and Exchange Commission (SEC)

Securities Exchange Act of 1934Regulates secondary market and national exchangesSEC was created by this Act

SEC has the authority to determine GAAP (generally accepted accounting principles)

Regulation S-X describes disclosure requirements

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History of Accounting

The Committee on Accounting Procedure

1933&

1934

1939to

1959

FASB

19731929

Stock Market Crash

SEC

2002

The Sarbanes-Oxley Act

Enron, WorldCom, etc.

2009

FASB Codification

29Public Company Accounting Oversight Board

Created by the Sarbanes-Oxley Act

An arm of the SEC

5 members: 2 CPAs, 3 non-CPAs

Promulgates auditing standards for companies subject to the Sarbanes-Oxley Act◦ AICPA still issues auditing standards for non-public companies

CEOs and CFOs must certify financial statement disclosures

Section 404 requires companies to document adequate internal controls and procedures

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Concepts and international standards

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Concept Statement (SFAC) #8

Objective of financial reporting: to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources.

Information is provided about the economic resources, obligations, net resources and performance of an organization during a period of time.

Financial statement users need information to help them assess the prospects for future net cash inflows of the entity.

General purpose financial reports do not and cannot provide all of the information that stakeholders need.

General purpose financial reports are not designed to show the value of the reporting entity, but they provide information which will help the use estimate the value.

 

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International Standards

The goal of the International Accounting Standards Board (IASB) is to develop a single set of high-quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated principles.

The FASB and the IASB have been working together to achieve convergence

The SEC is not likely to require international standards

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FASB website for more information