1、会计专业英语教案一CHAPTER 1: INTRODUCTION1TYPES OF BUSINESS OWNERSHIPAs with types of businesses, the way in which the accounting information is reported will depend on the type of ownership.The main types of ownership are:Sole proprietorThis is one person in business on his or her own. The owner gets to mak
2、e all the decisions but has no other owner of the business to consult if needed. The owner also gets to keep all the profits but, if the business should fail, the owner not only loses the business but all his or her personal possessions as well until the debts are satisfied. A sole proprietor has un
3、limited liability. It is also more difficult to obtain finance for a sole proprietor business. Nevertheless, most businesses begin life under sole proprietor ownership.Partnership Under this type of ownership, two or more people decide to pool their skills and resources and go into business together
4、. A partnership, like a sole proprietorship, has unlimited liability. Indeed, one partner may be responsible for getting the partnership into debt but another partner may have to pay those debts out of their personal funds. A partnership type of ownership is common among lawyers and doctors as they
5、are bound by the ethics of their profession to suffer unlimited liability. Accountants can now form companies, with the exception of Auditors.Company An important feature of a company is that it is a separate legal entity from its owners (shareholders). Since the company is a legal entity in its own
6、 right, it is responsible for its own debts and losses. This means that once the shareholders have paid what they agreed to pay for the shares, their obligation to the company and the companys creditors is satisfied. This is of great importance to the shareholders since they know their liability is
7、limited.Another feature of a company is that its life is not limited by the life of the shareholders. Shares may be sold by an existing shareholder to another person who wishes to become a shareholder. When a shareholder dies, that persons shares pass to the beneficiary of his or her estate.COMPARIS
8、ON OF OWNERSHIP Sole Proprietor Partnership CompanyLegal Status of Not a separate Not a separate Separate legalBusiness Entity legal entity legal entity entityRisk of Owners personal Partners personal Limited liabilityOwnership assets at risk assets at riskDuration Expires by owners Expires by choic
9、e Perpetual of Life choice or death of or withdrawal of succession owner partner Transferability If proprietor sells Partnership share Usually of Ownership his interest, the cannot be sold transferableInterests business is without agreement reconstituted of other partners: under new new partnership
10、ownership formedSources of Owners funds and Partners funds Shares, Finance loans and loans debentures, loans Profit All accrue to Shared according DividendsSharing owner to partnership declared by agreement or directors Partnership Act 1908Ownership One owner Two or more One or moreCapital Provided
11、by Partners contribute Divided into owner according to shares partnership agreement Liability for Unlimited Unlimited Limited tofirms debts the amount outstanding on share capitalManagement Owner Each partner Appointed by shareholders2. Users of Financial InformationInternal Users Managers who plan,
12、 organize and run a business Marketing managers Production supervisors Finance directors Company officersExternal Investors Creditors Others Regulatory agencies Tax authorities Customers Labor Unions Economic planners3. Types of Business ActivityFinancing Activities Borrowing creates liabilities Ban
13、k loans Debt securities Goods on credit or payables Selling stock creates stockholders equityInvesting Activities Obtaining resources or assets to operate the business Land Buildings Vehicles Computers Furniture EquipmentOperating Activities Primary activity of businessSelling goodsProviding service
14、sManufacturingCost of SalesAdvertisingPaying employeesPaying utilitiesOperating ActivitiesRevenues are the increases in assets resulting from the sale of a product or serviceExpenses are the cost of assets consumed or services used in generating revenue.If revenue expense = Net IncomeIf revenue expe
15、nse = Net Loss!4. Content and Purpose of Financial Statements Accountants communicate with users through four financial statementsThe Objective of Financial Statements The objective of financial statements is to provide information about the financial position, performance and changes in financial p
16、osition of an enterprise that is useful to a wide range of users in making economic decisions. Four Financial Statements Income Statement Retained Earnings Statement Balance Sheet Statement of Cash FlowsTHE INCOME STATEMENT PURPOSE OF THE INCOME STATEMENTThe purpose of the Income Statement is to rep
17、ort the results of the business operations for a given period of time, called the Accounting Period.It measures Profit (or Loss) for the period by deducting Expenses from Income, using the formulaINCOME EXPENSES = PROFIT (LOSS) FOR THE PERIODUSES OF THE INCOME STATEMENT Managers allocate resources b
18、ased on the performance of the business It can be used to discover if the business is maintaining an adequate margin on sales The Inland Revenue Department (IRD) uses it to assess taxation liability Unions may examine it as part of salary discussions Investors are interested in judging the performan
19、ce of the business to assess the management performance, and to judge both future business success and return on investment It can be submitted to banks in support of a loan application, to assist banks to judge income potential (to repay the loan!) External users, in particular, can assesso Investm
20、ent value (is there a good return on assets?)o Creditworthiness (is the business earning enough to pay suppliers?)o Ability to earn income Overall it is useful in evaluating the past performance of the businessCLASSIFYING THE INCOME STATEMENTIncome can be classified asa) Revenue (or, for a trading o
21、rganisation, Trading Revenue) andb) Other IncomeRevenue is all revenue included in determining the operating profit of the period, and is the main source of revenue for the firm. For example, for a trading business this wil be the sale of goods.Other Income is supplementary revenues, not from the ma
22、in activities of the firm,. For example renting out some spare warehouse space. Expenses can be classified asa) Trading Expenses b) Selling and Distribution Expensesc) Administrative Expensesd) Financial Expensese) Other ExpensesExpenses may be further classified into various groups that suit a part
23、icular business. Each group contains types of expenses that have a similar nature. A common classification is: a) Trading Expenses - those that relate directly to bringing the goods into the business for resale. For example customs duty, cartage inwards, packaging.b) Selling and distribution expense
24、s those expenses incurred to increase the sales of a business and distribute the product to the customers. For example sales salaries and wages, advertising, sales van expenses, cartage outwards.c) Administrative expenses those expenses incurred in order to organise a business. For example electrici
25、ty, rates, telephone, rent, office salaries and wages, insurance, accountancy fees.d) Financial expenses those expenses incurred in financing the business. For example bad debts, interest on loan, interest on mortgage, discount allowed.Examples of Other Expenses are loss on sale of property, donatio
26、nsRetained Earnings Statement (also called changes in equity) Shows changes in retained earnings for period: month, quarter, year Beginning balance Add Net Income from income statement. Deduct Dividends Ending balanceFor a Sole Proprietor, The Capital, or Equity, that shows on the Trial Balance is t
27、he OPENING Capital. Transactions occur during the financial year that will affect the Equity, causing it to have increased or decreased by the end of the financial year. The change from Opening to Closing Capital is usually shown within the Equity section at the bottom of the Balance Sheet, as shown
28、 in the following example for Richards Rhubarb Shop:EXAMPLE:Accounts Payable 35,000Accounts Receivable 45,000Bank Loan Long Term 175,000Bank Overdraft 21,000Land (cost) 195,000Inventory 213,000Cash on hand 2,000Shares in other Companies 8,000Goodwill 5,000Capital (opening) 238,800Drawings 10,200Othe
29、r Information:Profit for the year ended 31 March 2016 was $8,400 Required: Complete a fully classified Balance SheetANSWER:Richards Rhubarb ShopBalance Sheet as at 31 March 2016 $ $ $Current Assets Cash on Hand 2,000 Accounts Receivable 45,000 Inventory 213,000 260,000Non-Current Assets Property, Pl
30、ant and Equipment Land 195,000 Investments Shares in other companies 8,000 Intangibles Goodwill 5,000 208,000Total Assets 468,000 Current Liabilities Bank Overdraft 21,000 Accounts Payable 35,000 56,000Non-Current Liabilities Bank Loan 175,000Total Liabilities 231,000NET ASSETS $ 237,000EQUITY Capit
31、al (opening) 238,800 Plus: Profit for the period 8,400 247,200 Less: Drawings 10,200 Capital (closing) $ 237,000THE BALANCE SHEETTHE PURPOSE OF THE BALANCE SHEETThe purpose of the Balance Sheet is to show the financial position of a business at a particular point of time.It reports the assets of the business and how these assets have been funded. The assets can be funded by liabilities (external funding) or owners equity (inter
