《Survey of accounting 2th会计学 Carl S.Warren》ch01.pptVIP

What is accounting? Accounting is an information system that provides reports to stakeholders about the economic activities and condition of a business. Major objectives of financial accounting 1. To report the financial condition of a business at a point in time. 2. To report changes in the financial condition of a business over a period of time. Describe and illustrate the basic financial statements and how they interrelate. 4 Learning Objective Income Statement An income statement is a summary of the revenue and the expenses for a specific period of time. Objective: Reports change in financial condition Income Statement Hershey Foods Corporation Income Statement For the Year Ended December 31, 2001 (in thousands) Revenues: Sales $4,557,241 Expenses: Cost of sales $2,665,566 Selling and administrative 1,269,964 Other expenses 209,077 Interest 69,093 Income taxes 136,385 4,350,085 Net income $ 207,156 Note that the time period for the statement is in the heading. Retained Earnings Statement The retained earnings statement reports changes in financial condition due to changes in retained earnings. Objective: Reports change in financial condition Retained Earnings Statement Hershey Foods Corporation Retained Earnings Statement For the Year Ended December 31, 2001 (in thousands) Retained earnings, January 1, 2001 $2,702,927 Add net income $207,156 Less dividends 154,750 Increase in retained earnings 52,406 Retained earnings, December 31, 2001 $2,755,333 From the income statement Again, note the time period Balance Sheet The balance sheet reports the financial condition as of a point in time. Objective: Reports financial condition Balance Sheet Assets = (Claims) Rights to the Assets Balance Sheet Assets = Liabilities Stock-holders’ Equity + The rights of creditors The rights of the stockholders The Accounting Equation Balance Sheet Hershey Foods Corporation Balance Sheet December 31, 2001 (in thousands) Assets Cash $ 134,147 Accounts re