Accounting Mba
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[pic 1]Financial accounting: Define Accounting: accounting system collects financial information for an organization and report that information for decision makers.The accounting equation: Assets = Liabilities + Shareholders Equity[pic 2][pic 3][pic 4][pic 5][pic 6][pic 7][pic 8]This equation for all kinds of companies servicing, merchandising & manufacturingBriefly distinguish financial accounting from managerial accounting:Financial accountingManagerial accountingTime framePeriodic financial statements and related disclosures. Monthly or Quarterly Or Annually Detailed plans and continued performance reportsUsersExternal usersInternal usersExample for usersCreditors, investors, suppliers & customers.Managers.Users:What are the expectations of the investors when they acquire shares?Investors Shareholders [pic 9]Current PotentialDividends to be received – Part of profit distributed to shareholders – Share price to increase (Capital Gain) What are the expectations of the banks when they grant a loan to a borrower?[pic 10][pic 11][pic 12][pic 13][pic 14][pic 15][pic 16][pic 17][pic 18][pic 19][pic 20][pic 21][pic 22][pic 23][pic 24][pic 25][pic 26][pic 27][pic 28][pic 29][pic 30]Creditors for Example: Banks [pic 31]To get the periodic interest.To get principal of the loan back. Important Notice:Investors & creditors are the primary users of financial accounting information.What is the useful information provided by financial accounting?Profitability informationFinancial position (Assets + Liabilities + Shareholders Equity)Cash FlowsLegal form for an organization:Sole proprietorship: Single owner.Partnership: Two partners or more. Corporation: Owned by shareholders (stockholders or stakeholders). [pic 32][pic 33][pic 34][pic 35][pic 36][pic 37][pic 38] [pic 39][pic 40]Major types of business organization:
Service business provides services for a price.Merchandising business buys merchandises for reselling them again.Manufacturing business acquire raw material which are processed for finish products.[pic 41][pic 42][pic 43][pic 44][pic 45][pic 46][pic 47][pic 48][pic 49][pic 50][pic 51][pic 52]The four basic financial statements:Income statement, Operation statement or Earnings statementEquation: Net income = Revenue – ExpensesThe non-operating revenue: Depositing money in bank & receive interest.Interest revenue Non-operating Revenue[pic 53] Company owns building five floors, uses four floors and rented the fifth floor for 60,000 $. Rent revenue Non-operating Revenue[pic 54]Example 1:Company XCompany YMoney In DollarPercentageMoney In DollarPercentageAssets20,000,000100%20,000,000100%Liabilities16,000.00080%7,000,00035%Shareholders Equity4,000,00020%13,000,00065%Shareholders Equity = Assets – Liabilities[pic 55]How do we prepare financial statements?Financial statements are prepared using a set of accepted methods and procedures called Generally Accepted Accounting Principles (GAAP). Example 2:Company X Advertising during 2014Provided services for 1,500,000