会计英语ppt[183页]课件

1、English AccountingChapter 1Fundamentals of accountingChapter 1 Fundamentals of accounting1.1 Forms of enterprise organization1.2 Two kinds of accounting1.3 Accounting concepts and principles1.4 Elements of the financial statement1.5 The accounting equation1.6 Accrual basis and cash basis1.1 Forms of

2、 enterprise organizationproprietorship PartnershipLimit liability companyPublic company1.1 Forms of enterprise organization1.2 Two kinds of accountingManagement accountingFinancial accounting1.3 Accounting concepts and principlesThe entity conceptThe entity concept requires that the transactions of

3、each entity are accounted for separately from the transactions of all other organizations and persons. It is the most basic accounting concept. The accounting entity concept is applied to all organization forms of business: single proprietorship, partnership, and company.1.3 Accounting concepts and

4、principlesThe going-concern conceptThe going-concern convention is the assumption that ordinarily an entity persists indefinitely. In another word, an entity will remain in operation long enough to use existing assets for their intended purpose. Under this assumption, an entity reports its long-term

5、 assets, such as plant and equipment, based on their historical cost rather than the liquidation value.1.3 Accounting concepts and principlesThe time-period conceptFor accounting information to be useful, it must be made available at regular intervals. The time-period concept ensures that accounting

6、 information is reported at regular intervals. The basic accounting period is one year, for example, an entity prepares annual financial report. An entity also prepare financial statement for interim period, such as a month, a quarter, and a semiannual period.1.3 Accounting concepts and principlesTh

7、e cost principleThe cost principle states that assets should be recorded at their historical cost, which is more reliable. In addition to the historical cost, there are other measurement methods. For example, fair value, present value, replacement cost, and net realizable value. 1.3 Accounting conce

8、pts and principlesThe stable-monetary-unit conceptIn China, we record transactions in RMB while Americans record transactions in US dollars. The value of RMB changes all the time. A rise in the general price level is called inflation. A decline in the general price level is called deflation. Under t

9、he stable-monetary-unit concept, we ignore inflation and deflation. Accountants assume that the currency value is stable.1.4 Elements of the financial statementFinancial positionAssetAn asset is an economic resource controlled by the entity as a result of past events, which is expected to produce a

10、future benefit. For example, cash, land, plant, inventory.LiabilityA liability is a present obligation of the entity arising from past events, which will result in an outflow of resource from the entity. They are debts that are payable to creditors. Owners equityEquity means ownership. It is a resid

11、ual value, which equals to assets minus liability. There are two main sub-parts in owners equity: paid in capital and retained earnings. 1.4 Elements of the financial statementBusiness performanceRevenueAn entity creates revenue by provide goods and service to customers. Revenues will increase the o

12、wners equity of an entity. ExpenseExpenses are decreases in economic benefits during the accounting period in the form of outflow of assets. Revenues will decrease the owners equity of an entity. IncomeIncome is also called profit or earnings. It is the excess of revenues over expenses. When the exp

13、enses are more than revenues, an entity recognize loss.1.5 The accounting equationThe accounting equation states that assets equal liabilities plus equity. This equation will always hold as long as no error has been made. This equation is the basis of double-entry bookkeeping system, and the basis o

14、f the statement of financial position.Assets=Liabilities + Owners equityAssets=Liabilities + paid in capital + Retained earningsIncome=Revenues - Expenses1.6 Accrual basis and cash basisAccrual basisAccrual basis is an accounting method that recognizes the impact of transactions on the financial sta

15、tements in the time periods when revenues and expenses occur.Cash basisCash basis is an accounting method that recognizes the impact of transactions on the financial statements only when a company receives or pays cash.Chapter 2 TransactionChapter 2 Transaction2.1 Transaction2.2 Accounting elements2

16、.3 Journal entry2.4 Accrual accounting2.5 Posting2.6 Trail balance2.7 Close the books2.1 TransactionA transaction is any event that has a financial impact on business and can be measured reliably.As accounting equation is an identical equation, each transaction effects at least two accounting elemen

17、ts. Financial impact determines what kind of accounting elements to use.2.2 Accounting elementsAssetsCashLandBuildingEquipmentInventorySuppliesAccounts receivableNotes receivble2.2 Accounting elementsLiabilitiesAccount payable is a current liability account showing the debt from a credit purchase of

18、 inventory or service. If it is an account receivable to a seller, then it is an account payable to a buyer. Note payable is a note promising to pay a certain amount of money at a certain time, carrying interest. If it is a note receivable to a seller, then it is a note payable to a buyer. It is als

19、o used when borrowing money from the bank. 2.2 Accounting elementsStockholders equityCommon stock account shows the owners investment in the entity. It can also be used as paid in capital.Retained earnings account shows the cumulative net income earned by an entity, minus its cumulative net losses a

20、nd dividend over the entitys lifetime.Dividend is the money declared and paid to the owners by an entity. It is optional, which means the board of directors can decide to pay dividend or not. Dividend is not an expense. It will never affect net income2.2 Accounting elementsRevenueSales revenueServic

21、e revenueRent revenueInterest revenue2.2 Accounting elementsExpenseCost of goods soldSalary expense Rent expenseInterest expenseUtilities expense Advertising expense2.3 Journal entryCloris Zhang and a few friends opened a clinic near a community, named Health and Care Clinic. During March, 2016, the

22、 following transactions happened.2.3 Journal entryTransaction 1Cloris and her friends invest $500,000 to Health and Care, and issue common stock to the stockholders2.3 Journal entryTransaction 1Cloris and her friends invest $500,000 to Health and Care, and issue common stock to the stockholders.Dr:

23、Cash . . . . . . . . 500,000 Cr: Common stock . . . . .500,0002.3 Journal entryTransaction 2Health and Care purchases land for a new location and pays cash of $100,000.2.3 Journal entryTransaction 2Health and Care purchases land for a new location and pays cash of $100,000. Dr: Land . . . . . . . .

24、100,000 Cr: Cash . . . . . 100,0002.3 Journal entryTransaction 3Health and Care buys some medical supplies by cash, $5,000.2.3 Journal entryTransaction 3Health and Care buys some medical supplies by cash, $5,000. Dr: Supplies. . . . . . 5,000 Cr: Cash . . . . . 5,0002.3 Journal entryTransaction 4Hea

25、lth and Care earns $4,000 by providing medical service for customers and received cash.2.3 Journal entryTransaction 4Health and Care earns $4,000 by providing medical service for customers and received cash. Dr: Cash . . . . . . . . 4,000 Cr: Service revenue . . 4,0002.3 Journal entryTransaction 5Du

26、ring this month, Health and Care pays cash for the following expenses: equipment rent, $1,000; employee salary, $3,000; utilities, $500; advertisement fee, $1,000.2.3 Journal entryTransaction 5During this month, Health and Care pays cash for the following expenses: equipment rent, $1,000; employee s

27、alary, $3,000; utilities, $500; advertisement fee, $1,000. Dr: Rent expense . . . . . . . .1,000 Salary expense . . . . . . 3,000 Utilities expense. . . . . 500 Advertising expense. . . . .1,000 Cr: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,5002.3 Journal ent

28、ryTransaction 6Cloris pays $10,000 for a vacation to Australia.2.3 Journal entryTransaction 6Cloris pays $10,000 for a vacation to Australia.It is a personal transaction, and it is not recorded.2.3 Journal entryTransaction 7Health and Care sales some land which bought in Transaction 2 at its cost.2.

29、3 Journal entryTransaction 7Health and Care sales some land which bought in Transaction 2 at its cost. Dr: Cash. . . . . . 100,000 Cr: Land . . . . . . . 100,0002.3 Journal entryTransaction 8Health and Care declare a dividend, and pays cash of $10,0002.3 Journal entryTransaction 8Health and Care dec

30、lare a dividend, and pays cash of $10,000 Dr: Dividend. . . 10,000 Cr: Cash . . . . 10,0002.4 Accrual accountingIn daily operation, business dont always receive or pay cash when the transaction occurs. According to the accrual basis, we need to adjust this kind of transactions to proper accounting p

31、eriod. The purpose of adjusting:Measure incomeUpdate the balance sheet2.4 Accrual accountingExplicit transactions are observable events such as cash receipts and disbursement, credit purchases, and credit sales that trigger nearly all day-to-day routine entries.Implicit transaction are events that d

32、o not generate source documents or visible evidence of the event. We do not recognize such events in the accounting records until the end of an accounting period.Adjustments are end-of-period entries which assign the financial effects of implicit transactions to the appropriate time period.2.4 Accru

33、al accountingType of adjustingDeferralsExpiration of unexpired cost and Prepaid expenseUnearned revenueAccrualsAccrual of unrecorded expensesAccrual of unrecorded revenueDepreciation2.4 Accrual accountingDeferralsExpiration of unexpired cost and Prepaid expenseTransaction 9In March 2nd, Health and C

34、are purchased $10,000 supplies, and at the end of the month, there are $8,500 supplies left.2.4 Accrual accountingTransaction 9In March 2nd, Health and Care purchased $10,000 supplies, and at the end of the month, there are $8,500 supplies left.March 2 Dr: Supplies 10,000 Cr: Cash 10,000March 31 Dr:

35、 Supplies expense 1,500 Cr: Supplies 1,5002.4 Accrual accountingTransaction 10Health and Care paid $6,000 for 3 months rent in March 1st.2.4 Accrual accountingTransaction 10Health and Care paid $6,000 for 3 months rent in March 1st.March 1 Dr:Prepaid rent expense 6,000 Cr: Cash 6,000March 31 Dr: Ren

36、t expense 2,000 Cr: Prepaid rent expense 2,000April 30 Dr: Rent expense 2,000 Cr: Prepaid rent expense 2,000May 31 Dr: Rent expense 2,000 Cr: Prepaid rent expense 2,0002.4 Accrual accountingDeferralsUnearned revenueTransaction 11Health and Care received $9,000 for 3 months rent in March 1st.2.4 Accr

37、ual accountingTransaction 11Health and Care received $9,000 for 3 months rent in March 1st.March 1 Dr:Cash 9,000 Cr: Unearned rent revenue 9,000March 31 Dr: Unearned rent revenue 3,000 Cr: Rent revenue 3,000April 30 Dr: Unearned rent revenue 3,000 Cr: Rent revenue 3,000May 31 Dr: Unearned rent reven

38、ue 3,000 Cr: Rent revenue 3,0002.4 Accrual accountingAccrualsAccrual of unrecorded expensesTransaction 12Health and Care borrowed money from the bank, the interest for March is $750.2.4 Accrual accountingTransaction 12Health and Care borrowed money from the bank, the interest for March is $750.Accru

39、al interest Dr: Interest expense 750 Cr: Interest payable 750Pay interest Dr: Interest payable 750 Cr: Cash 750Another example is salary payable2.4 Accrual accountingAccrualsAccrual of unrecorded revenueTransaction 13Health and Care lend money to another entity, the interest for March is $800.2.4 Ac

40、crual accountingTransaction 13Health and Care lend money to another entity, the interest for March is $800.Accrual interest Dr: Interest receivable 800 Cr: Interest revenue 800Receive interest Dr: Cash 800 Cr: Interest receivable 8002.4 Accrual accountingDepreciationTransaction 14In July 4th, 2015,

41、Health and Care purchase a equipment for 12000. The useful life is 5 years, and the residual value is 0. Suppose Health and Care use straight-line method.2.4 Accrual accountingTransaction 14In July 4th, 2015, Health and Care purchase a equipment for 12000. The useful life is 5 years, and the residua

42、l value is 0. Suppose Health and Care use straight-line method.July 31 Dr: Depreciation expense 200 Cr: Accumulated depreciation 2002.5 PostingAccountants use a chronological record of transactions called a journal. But the journal does not indicate how much cash or accounts receivable the entity ho

43、lds while a T-account can.The left side means debit, and the right side means credit. A ledger is a grouping of all the T-accounts. The process from journal to ledger is called posting.2.6 Trail balanceAfter posting journal entries to the ledger, the next step is the preparation of a trail balance.

44、A trail balance is a list of all accounts with their balances. It summarizes all the account balances for the financial statements and show whether total debits equal total credits.2.6 Trail balanceTrial BalanceMarch,31, 2016BalanceAccount TitleDebitCreditCash476550Land0Supplies13500Prepaid rent exp

45、ense4000Interest receivable0Accumulated depreciation200Unearned rent revenue6000Interest payable0Common stock500000Dividend10000Service revenue4000Rent revenue3000Interest revenue800Rent expense3000Salary expense3000Advertising expense1000Utilities expense500Supplies expense1500Interest expense750De

46、preciation expense200 Total5140005140002.7 Close the booksTemporary accountAccounts like revenues and expenses, which relate to a limited period are called temporary account. For example, revenues, expenses, dividends.Permanent accountAccounts like assets, liabilities, and equities, which carry over

47、 to the next period are called permanent account. Permanent accounts are not closed at the end of accounting period.2.7 Close the booksClose the books means preparing the ledger accounts to record the next periods transactions by making closing entries that summarize all balances in the revenue and

48、expense accounts and transferring the balances to retained earnings.2.7 Close the booksDebit each revenue account for the amount of its credit balance. Credit retained earnings for the sum of revenues. Dr: Service revenue 4,000 Rent revenue 3,000 Interest revenue 800 Cr: Retained earnings 7,8002.7 C

49、lose the booksCredit each expense account for the amount of its debit balance. Debit retained earnings for the sum of the expenses. Dr: Retained earnings 9,950 Cr: Rent expense 3,000 Salary expense 3,000 Advertising expense 1,000 Utilities expense 500 Supplies expense 1,500 Interest expense 750 Depr

50、eciation expense 2002.7 Close the booksCredit the dividends account for the amount of its debit balance. Debit retained earnings. Dr: Retained earnings 10,000 Cr: Dividends 10,000Chapter 3 ReceivablesChapter 3 Receivables3.1 Variety of receivables3.2 Account for uncollectible account3.3 Measurement

51、of uncollectible account3.4 Note Receivable3.1 Variety of receivablesAccounts receivable are current asset account showing amounts payable to an entity by customers who have made purchases of goods or service on credit. Notes receivable are similar to an account receivable, but a note receivable is

52、more binding because the customer signed the note3.1 Variety of receivablesBy selling goods and serviceAccount receivable Dr: Account receivable. . . . . . XXX Cr: Sales revenue. . . . . . XXXBy lending money to othersNote receivable Dr: Note receivable. . . . . XXX Cr: Cash. . . . . . . . . XXX3.2

53、Account for uncollectible accountBy selling on credit, company run the risk of not collecting some receivable. It is called uncollectible-account expense, doubtful-account expense, or bad-debt expense. How should a company account for these receivables? How do we decide which are collectible and whi

54、ch are not? There are two basic ways to record uncollectible: Specific write-off method Allowance method3.2 Account for uncollectible accountSpecific write-off methodThis method of accounting for bad debt losses assumes all sales are fully collectible until proved otherwise.3.2 Account for uncollect

55、ible accountSpecific write-off methodAssume that Alice Furniture Manufacturer ending balance of account receivable is $100,000 in 2015. In 2016, Alice Furniture Manufacturer collect $98,000 back and the rest $2,000 is proved uncollectible.3.2 Account for uncollectible account3.2 Account for uncollec

56、tible accountSpecific write-off methodThe journal entry should be:2016 Dr: Bad debt expense . . . . . 3,000 Cr: Account receivable . . . . . . .3,0003.2 Account for uncollectible accountThe specific write-off method is unreasonable for 2 reasons: Receivables are reported at full amount in 2015, howe

57、ver, the amount of account receivable can not be all collected during the year. So that assets on the balance sheet of 2015 are overstated. The specific write-off method fails to apply the matching principle of accrual accounting. The bad debt of $2,000 should be the result of 2015, however it is re

58、corded as an expense of 2016.3.2 Account for uncollectible accountAllowance methodThe best way to measure bad debts is by the allowance method. This method records collection losses based on estimates developed from the companys collection experience. Alice Furniture Manufacturer doesnt wait to see

59、the customer will not pay. Instead, it records the estimated amount as bad debt expense, and also set up allowance for uncollectible accounts, allowance for doubtful accounts, or allowance for bad debts.3.2 Account for uncollectible accountUncollectible-account expense,- Allowance for uncollectible

60、accounts Doubtful-account expense, -Allowance for doubtful accounts Bad-debt expense,-Allowance for bad-debts.3.2 Account for uncollectible accountAllowance method Sales on account Dr: Account receivable . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 Cr: Sales revenue . . . . . . . . . .