《会计专业英语》PPT课件.ppt

1、English in Accounting ProfessionSeptember, 2009,Part Financial Accounting,Chapter 1. Financial Accounting Conceptual Framework,What is Accounting?,Accounting is the art of interpreting, measuring and communicating the results of economic activities. Accounting has often been called the language of b

2、usiness. The use of accounting information is not limited to the business world.,Chapter Skeleton,Learning Objectives: Define accounting, financial accounting, and financial statement. Describe and prepare a balance sheet; define assets, liabilities, and owners equity. Explain the accounting bases a

3、nd assumptions. Describe the accounting principles and measurement bases and qualitative characteristics of financial accounting information.,1.1 The purpose of Accounting and Financial Reporting,Accounting may be described as the process of identifying , measuring, recording, and communicating econ

4、omic information to permit informed judgments and decisions by users of that information. The origins of accounting are generally attributed to the work of Luca Pacioli, an Italian Renaissance mathematician.,There are many types of accounting information: Financial Accounting Managerial Accounting T

5、ax Accounting,Financial Accounting refers to information describing the financial resources, obligations, and activities of an economic entity(either an organization or an individual). Financial Accounting information is designed primarily to assist investors and creditors in deciding where to place

6、 their scarce investment resources. A business is an organzation in which basic resources(inputs). The objective of most business is to maximize profits.,What is the role of financial accounting in business? The simplest answer is that financial accounting provides information for managers to use in

7、 operating the business. In addition, financial accounting provides information to other stakeholders to use in assessing the economic performance and the condition of the business.,Identify stakeholders (Internal: Owners, managers, employees, etc. External: Customers, creditors, government, etc.),A

8、ssess stakeholders informational needs.,Design the accounting information system to meet stakeholders needs,Prepare accounting reports for stakeholders.,Record economic data about business activities and events,Illustration 1-1. Financial Accounting Information and the Stakeholders of a Business,Fin

9、ancial Reporting: supplying general-purpose financial information about a business to people outside the organization. Financial Statement: the principal means of reporting general-purpose financial information to the persons outside a business organization is a set of accounting reports. The users

10、of the Financial Statement: the persons receiving these reports.,A complete set of financial statements includes: A balance sheet, showing at a particular point of time(a specific date) the financial position of the company by indicating the resources that it owns, the debts that it owes, and the am

11、ount of the owners equity(investment) in the business. An income statement, including the profitability of the business over the preceding years(or a particular time period). A statement of cash flows, summarizing the cash receipts and cash payments of the business over the same time period covered

12、by the income statements.,The statement of cash flow reports the cash effects of a companys perations during a period its investing transactions its financing transactions the net increase or decrease in cash during the period the cash amount at the end of the period,In addition , a complete set of

13、financial statements usually includes several pages of notes, containing additional information which accountants believe is useful in the interpretation of the financial statements. The basic purpose of financial statements is to assist users in evaluating the financial position, profitability, and

14、 future prospects of a business. The information communicated to the external users in financial reporting is based on standards that establish CAS(Chinese Accounting Standards).,Objectives of Financial reporting,The objectives are to provide information that: Is useful to those making investment an

15、d credit decisions; Is helpful in assessing future cash flows Indentifies the economic resources(assets), the claims to those resources(liabilities), and the changes in those resources and claims.,1.2 Accounting basis and Accounting Assumptions,Two types of accounting basis Cash-basis accounting Acc

16、rual-basis accounting,Cash Basis,Is the method of bookkeeping that records financial events based on cash flow and cash position. Revenue is recognized when cash is received and expense is recognized when cash is paid. Two types of cash-basis accounting exist: Strict cash-basis modified cash-basis,A

17、ccrual-Basis,Records financial events based on economic activity rather than financial activity. Revenue is recorded when it is earned and realized, regardless of when actual payment is received. Expenses are “matched” revenue regardless of when they are actually paid. Accrual accounting is required

18、 by CAS and other financial accounting standards like GAAP, IFRS,etc.,Comparison A simple Example Other considerations,Accounting Assumptions,CAS treats the following as the fundamental accounting assumptions: Entity Continuity Period of Time Monetary Unit,1.3 Financial Accounting Principles and Mea

19、surement Bases,Financial accounting principles,Cost Principle Revenue Recognition Principle Matching Principle Full disclosure Principle,Cost Principle,The cost principle states that assets should be recorded at their cost. Cost is the values exchanged at the time something is acquired. Cost is reli

20、able. The values exchanged at the time something is acquired generally can be objectively measured and can be verified.,Revenues Recognition Principle,The revenue recognition principle dictates that revenue be recognized in the accounting period in which it is earned. Accountants follow the approach

21、 of “let expenses follow revenue”. The nature of expenses: costs are the source of expenses. Costs that will generate revenues obly in the current accounting period are expensed immediately.,Unexpired costs become expenses in two ways 1. Cost of goods soled. 2. Operating expenses.,Revenues Recogniti

22、on Principle,Cost Incurred,Asset,Expenses,Provides future benefits,Provides no apparent future Provides future benefits,Unexpired Expired Cost Cost,Benefits Decrease,Illustration 1-2. Expense Recognition,Matching Principle,Once the economic life of a business has been divided into artificial time pe

23、riods, the revenues recognition and matching principles can be applied. This one assumption and two principles thus provide guidelines as to when revenues and expenses should be reported.,Time Period Assumption,The economic life of any business can be divided into artificial time periods,Revenue Rec

24、ognition Principle,Matching Principle,Revenue recognized in the accounting period in which it is earned.,Expenses matched with revenues in the period when efforts are expensed.,Full disclosure Principle,This principle requires that circumstances and events that make a difference to financial stateme

25、nt users be disclosed.,Financial Accounting Measurement bases,Market Value(Fair Value) Historical Cost Net Realizable Value Current Value(Present Value),Market Value,Market value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willi

26、ng seller in an arms length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.,Historical Cost,The economic activities and resourced of a company initially are measured by the exchange price of a t transaction at the time the trans

27、action occurs. Usually the exchange price(the historical cost ) is retained in the accounting records as the value of an item until the item is consumed, sold, or liquidated and removed from the records.,Net Realizable Value,A method of determining the present value of a troubled asset to its presen

28、t owner may be based on the assumption that the asset will be held for a period of time and sold at some future date. With regards to inventory, net realizable value(NRV) is the estimated selling price selling price in the ordinary course of business minus any cost to complete and to sell the goods.

29、 Net realizable value is also associated with accounts receivable.,Current Value(Present Value),Is the value on a given date of a future payment or series of future payments, discounted to reflect the time value of money and other factors such as investment risk.,1.4 Qualitative Characteristics of A

30、ccounting Information,Pervasive Constraint User-Specific Quality Overall quality Primary Decision-Specific Qualities Ingredients of Primary Qualities Secondary and Interactive Quality Threshold for Recognition Additional Consideration Illustration 1-4 Hierarchy of Qualitative Characteristics of Acco

31、unting Information,Accounting Information,Benefits Costs,PV,FV,T,V,RF,N,Comparability (Including Consistenc),Materiality,Understandability,Decision Usefulness,Relevance,Reliability,Conservatism,Illustration 1-4 presents a hierarchy of the qualititative characteristics of accounting information. This

32、 section presents an overview of the hierarchy, after which we define and discuss the components in detail. The hierarchy is bounded by three constraints. To be useful, accounting information must have each of the qualitative characteristics, at least to a minimum degree.,Understandability,Accountin

33、g information should be understandable to users who have a reasonable knowledge of business and economic activities and who are willing to study the information which reasonable diligence.,Decision Usefulness,Is the overall qualitative characteristic to be used in judging the quality of accounting i

34、nformation.,Relevance,Accounting information is relevant if it can make a difference in a decision by helping users predict the outcomes of past, present ,and future events or confirm or correct prior expectations. To be relevant, accounting information should have either predictive or feedback value, or both. In addition, it should be timely.,Reliability,Accounting information is most useful when it is reliable as well as relevant.