Objectives 1.The meaning of the accounting elements 2. The classification of accounting elements
Lead in business transactions: purchase Sell produce
How many elements in business activities? questions We should sum up various of business activities.
Six main factors ----accounting elements 负债 Liabilities 资产 Assets 所有 者权益 Owners’ equity 利润Profit 收入 income 费用 expense
questions 1.Assets • Definition： • Assets are resources with future • benefits that are owned or controlled • by a company. • Which of the following are assets? • 1.purchased trademark rights. • 2.purchased equipments. • 3.plants rent in. • 4.borrowing equipment.
Assets Current Assets Non-current assets 1.Cash 2.Bank deposit 3.Inventory 4.Account Receivable 5.Prepaid expense 1.Land and building 2.Plant 3.Equipment Classification of assets
questions 2.Liabilities • Characteristics : • 1. probable future sacrifices of • economic benefits ; • 2. present obligations ; • 3. funds provided by the creditors. • Which of the following are liabilities? • 1.borrowed money from bank. • 2.obtain payment for goods in advance. • 3.should pay tax.
Liabilities Current liabilities Non-current liabilities 1. Short-term loans 2. Account payable 3. wages payable 4.Advanced from customers 5. Dividends payable 6. Interest payable 7. Tax payable 1.Long-term loans Classification of liabilities
3.Owners’ equity • funds provided by investors. Assets-liabilities=owners’ equity
the elements reflects the financial position 2.Liabilities 1.Assets creditors = 3.Owners’ equity stockholders
4.Revenue revenue classification: 1.Sales revenue 2.Service revenue 3.Interest revenue 4.Rent revenue What are the sources of income?
5.Expense Let’s look at the classification of expense: 1.direct material cost 2.direct labor cost 3.manufacturing overhead 4.maintenance 5.advertising expenses Expense are the costs that are related to entity’s basic business.
6.Profit • Revenue minus expense equals profit. Revenue-Expense=Profit
have a try! • By the end of December, Company A had achieved sales revenue RMB￥50000 ,rent revenue RMB￥10000. • Cost of sales RMB￥35000,wages expense RMB￥15000. • Please figure out company profit?
Question: How to classify the specific contents of accounting object? For example, building? machine?
The basic structure of accounts “T”型账户 见图2-1
Main question How the business transactions affect on the accounting equation ?
review Q1.What are the six accounting elements?
Answer to Q1 Accounting elements reflecting financial position： assets liabilities owner’s equity Accounting elements reflecting Operating performance： profit revenue expense
assets owner’s equity liabilities
Example • Company A has bought a building (RMB1 000 000yuan), but there was only RMB800 000yuan, so the company has asked the bank for a loan about RMB200 000yuan. assets 1 000 000 liabilities 200 000 owner’s equity 800 000
The application of accounting equation It is the theoretical basis for setting up accounts、double entryand preparing balance sheet
Thinking Various kinds ofbusiness transactions have occurred to enterprise continually, will they destroy the balance of accounting equation?
machine+50 000 machine+50 000 Liability 50 000 Liability 50 000 machine+50 000 assets assets equity equity Example1: bought a machine(RMB500 000yuan), but has not paid yet
Cash -120 000 car+120 000 assets assets equity equity 2.Paid cash (RMB120 000yuan) for a car Cash -120 000 car+120 000 Car +120 000
Cash in bank-10 000 tax -10 000 assets assets equity equity 3. Paid the tax (RMB 10 000yuan) to the tax department Cash in bank-10 000 tax-10000
Cash in bank+1 500 000 Cash in bank+1 500 000 Owner’s equity +1 500 000 Owner’s equity +1 500 000 Cash in bank+1 500 000 assets assets equity equity 4.Company received an investment(RMB1 500 000),and deposit it in the bank.
Dynamic Accounting Equation revenue expense profit
profit profit liability liability expense owner's equity owner's equity assets assets revenue
conclusion: The balance of accounting equation still exits no matter which kind of business transactions happened.
main information Focal point: accouting elements, accounting title and accounts, the reasons for accounting equation Difficulty point：analysis for effects resulted from various kinds of business transactions
Exercise 1.Got a short loan(RMB100 000yuan) from the bank. 2. Bought the equipment (RMB 1 500yuan)by check. 1.Decide the accounting elements 2. Analyze and verify the equation
THE END • Thanks for your attention!