第01章 會計的基本框架 會計英語

1、新編會計英語簡明教程會計學院龍夏試要求2Chapter oneConceptual Framework Underlying Accounting Learning Objectives:1.To understand the definition of accounting.2.To learn the objectives of financial accounting.3.To identify the Qualitative Characteristics of accounting information.4. To understand the basic

2、 elements of financial statement and equation.5.To comprehend the accounting basic assumptions.6.To understand the important accounting principles.The Content StructureIntroduction about accountingDefinitionClassificationEthicsStandard SettingObjectives of FAFundamental conceptsQualitative Character

3、isticsElementsEquationRecognition & Measurement conceptsBasic assumptions of accountingBasic Principles of AccountingModified basic principlesTopic 1:Introduction about accounting What is the accounting? The accounting is bookkeeping?The Difference Between Accounting and BookkeepingBookkeeping i

4、s a recording process, much of which has been automated through the wide-spread use of computers.The accountant is responsible for deciding:how to classify and record transactions how to disclose those transactions in the financial statements how to measure the value of assets and liabilities and of

5、 their related revenues and expenseswhat additional disclosures are appropriate The definition of accounting. Accounting is a information system of interpreting, recording, measuring, classifying, summarizing, reporting and describing business economic activities with monetary unit as its main crite

6、rion.In another word:”Accounting is the process of identifying, measuring, recording, and communicating financial information about an economic entity.”What is the objective of accounting?In a simple word, the objective of accounting is to provide useful information to users.The users include the in

7、ternal users and external users.The classification of accountingManagerial accounting Financial accountingManagement Accounting: the rules and conventions used by an organization for reporting to internal parties for decision-making, control, planning, and internal performance evaluationFinancial Ac

8、counting: methods used to report an organizations financial condition and results of operations to internal and external partiesThe classification of the fields of accountantswork:-Public accounting, -Accounting for private business-Accounting for government and nonprofit organization The ethics in

9、accountingThe definition of ethics:Ethics is defined as the systematic study of standards of human conduct and moral judgment. It involves the examination of morality or the tendency to do what is right or wrong and good or bad.The Standard SettingIn USA:1. Securities and Exchange Commission (SEC)2.

10、 American Institute of Certified Public Accountants (AICPA)3. Financial Accounting Standards Board (FASB)4. Governmental Accounting Standards Board (GASB)5. Other influential organizations.American Accounting Association(AAA)Institute of Management Accountants (IMA)Financial Executives Institute (FE

11、I)Topic 2:Basic Objectives of financial accounting The definition of financial accounting:Financial accounting is defined as the gathering and presentation of financial information for the users. The objectives of financial accounting:(1) useful to those making investment and credit decisions who ha

12、ve a reasonable understanding of business and economic activities; (2) helpful to present the potential investors, creditors, and other users in assessing the amounts, timing, and uncertainty of future cash flows; (3) about economic resources, the claims to those resources, and the changes in them.T

13、opic 3Fundamental concepts Qualitative Characteristics of Accounting Information the qualitative characteristics of accounting information include: reliability, relevance, comparability, consistency, timeliness, and understandability.(1) Reliability Reliability means that the accounting information

14、is reliable to the extent that it is verifiable, is a faithful representation, and is reasonably free of error and bias.(2) Relevance Relevance means that there is a connection between the accounting information and the decision the users make, and the accounting information is able to make a differ

15、ence in a decision. It has predictive value and feedback value. The predictive value means that the relevant information helps users make predictions about the ultimate outcome of past, present, and future events. The feedback value means that the relevant information can help users to confirm or co

16、rrect prior expectations.(3) Comparability Comparability means that information should be measured and reported in a similar manner for different enterprises. (4) Consistency Consistency means that an entity applies the same accounting treatment to similar events from period to period. (5) Timelines

17、s Timeliness means that the measurement of accounting should be timely, and should not be advanced or deferred.(6) Understandability Understandability means that the reasonably informed users can perceive the quality of information. A Chart of Accounting Qualities of USAUsers of accounting informati

18、onPervasive constraintUser-specific qualitiesPrimaryDecision-specificqualitiesIngredients ofPrimary qualitiesSecondary andInteractive qualitiesThreshold for recognitionDecision makers and their characteristicsBenefitscostsUnderstandabilityDecision usefulnessRelevancePredictive valueFeedback valueTim

19、elinessReliabilityVerifiabilityRepresentationalfaithfulnessNeutralityComparability(including consistency)MaterialityBasic ElementsAssets: Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.Liabilities: Probable future sacrifices

20、 of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events.Equity: Residual interest in the assets of an entity that remains after deducting its liabilities. In a busi

21、ness enterprise, the equity is the ownership interest.Revenue: Inflows or other enhancements of assets of an entity or settlement of its liabilities (or a combination of both) during a period from delivering or producing goods, rendering services, or other activities that constitute the entitys ongo

22、ing major or central operations.Expenses: Outflows or other using up of assets or incurrence of liabilities (or a combination of both) during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entitys ongoing major or central operati

23、ons.Profits: The results of operations during an accounting period in an entity.Investments by owners: increases in net assets of a particular enterprise resulting from transfers to it from other entities of something of value to obtain or increase ownership interests (or equity) in it. Distribution

24、 to owners: Decreases in net assets of a particular enterprise resulting from transferring assets, rendering services, or incurring liabilities by the enterprise to owners.Comprehensive income: Change in equity (net assets) of an entity during a period from transactions and other events and circumst

25、ances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.Gains: Increases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other even

26、ts and circumstances affecting the entity during a period except those that result from revenues or investments by owners. Losses: Decreases in equity (net assets) from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the

27、 entity during a period except those that result from expenses or distributions to owners.Basic Equation:Assets =Equity =Liabilities + Stockholders EquityThis equation shows the relationship among assets, liabilities, and stockholders equity. Assets Liabilities = Stockholders Equity (Net Assets) Thi

28、s equation shows that the owners claim to business assets is residual. Topic 4Recognition and Measurement Concepts Basic Assumptions of Accounting (1) Economic Entity AssumptionThe economic entity means that the unit, which offers the accounting information, and it can be a business enterprise, an d

29、epartment, a division, or an entire industry.The economic entity assumption means that the activity of a business enterprise can be kept separate and distinct from its owners and any other business unit.The entity concept does not necessarily refer to a legal entity.example(2) Going Concern Assumpti

30、on The going concern assumption means that the business enterprise will remain a long life according to current situation. (3) Periodicity AssumptionThe periodicity (or time period) assumption means that the economic activities of an enterprise can be divided into artificial time periods. (4) Moneta

31、ry Unit Assumption The monetary unit assumption means that money is the common denomination of economic activity and provides an appropriate basis for accounting measurement and analysis. Basic Principles of Accounting (1) historical costThe historical cost principle requires that assets, liabilitie

32、s and equity be accounted for and reported on the basis of acquisition price. (2) revenue recognitionRevenue recognition principle requires that revenue is generally recognized when (1) realized or realizable and (2) earned. Revenues are realized when products (goods or services), merchandise, or ot

33、her assets are exchanged for cash or claims to cash. Revenues are realizable when assets received or held are readily convertible into cash or claims to cash. The recognition is different from realization.(a) recognition means the process of recording a transaction or event.(b) realization means the

34、 process of converting noncash assets to cash or claims to cash.(c ) The criteria of realization:I. Revenue must be capable of measurement.II. The measurement must be verified by an external market transaction.III. The crucial event must have occurred.Revenue is usually recognized at the point of sa

35、le.Several different situations about revenue recognition:(a) Revenue recognized during the production process.For example, the long-term construction contracts of roads, building, and dams.Percentage of completion method is used. Under this method, the revenue is allocated on the basis of percentag

36、e of the expected total costs that were incurred in a particular accounting period.(b) Revenue is recognized at the completion of production.For example, the gold or other minerals.Their prices are already determined(fixed price).(c ) Revenue is recognized as services are performed.Usually there are

37、 three steps in service contracts, and they are: order taking; performance of services; and collection of cash.Revenue should be recognized in relation to the degree of services performed.(d) Revenue is recognized as cash is received.In certain circumstances, the ultimate collectibility of the reven

38、ue is in doubt, so the recognition should be delayed until cash payment is received.For example, the payment is required in periodic installment. The matching principle means that the expense recognition is tied to revenue recognition. (3) matching(4) full disclosureThis principle requires that info

39、rmation included in financial reports provides sufficient details for users to make a difference, and sufficient condensation for users to understand the information. (a) The financial statements. (a formalized, structured means of communicating financial information).The item in the financial state

40、ments should meet the definition of a basic element, be measurable with sufficient certainty, and be relevant and reliable.(b) The notes to financial statements (generally amplify or explain the items presented in the main body of the statements)Examples of notes are: descriptions of the accounting

41、policies and methods used in measuring the elements reported in the statements; explanations of uncertainties and contingencies; and statistics and details too voluminous for inclusion in the statements.( c) Supplementary information (include details or amounts that present a different perspective f

42、rom that adopted in the financial statements)For example, managements explanation and discussion.In China, basis principles for recognition and measurement include four parts: (1) accrual basis; (2) matching; (3) historical cost; (4) revenue expenditure and capital expenditure.(1) Accrual basis: Und

43、er accrual basis, the revenue is recognized when it is earned, and expenses are recognized in the period incurred, without regard to the time of receipt or payment of cash. Under cash basis, revenue is recognized when the cash is received, and expenses are recognized only when the cash is paid.(2) R

44、evenue expenditure & capital expenditure: If the expenditure just influences current period, the expenditure is classified as revenue expenditure. If the expenditure influences not only current period but also future periods, the expenditure is called capital expenditure. Modified basic principles:In China. There are three parts: (1) conservatism; (2) materiality; (3) Industry practices (substance over form)(1) Conserv