Lecture 01 - Introduction

Question 1

What is accounting?

• process (3)
• goal (3)
• stakeholders (3)

Answer 1

Process of ..

• recording,
• summarizing (classifying),
• analyzing, financial transactions

Goal

• provide information about a business’s position and performance.
• produce accurate statements that stakeholders can use for decision-making
• support economic decisions

Stakeholders

• managers,
• investors,
• creditors, etc.

Question 2

Why do we need to learn accounting? (3)

Answer 2

• make investment decisions
• monitor management performance
• good performers get more capital investment (companies, projects, managers, etc.)

Question 3

Financial vs Managerial Accounting

• Who are the Decision Makers? (2)
• What Decisions are Made? (2)
• What Information is Needed? (2)

Answer 3

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Question 4

Types of Financial Statements (4)

Answer 4

1. Balance sheet
Snapshot of assets, liabilities, and owner’s equity
(at a specific point in time)

2. Income statement
Shows revenues, expenses, and profit/loss,
(over a period)

3. Statement of stockholders’ equity
Shows changes in equity accounts
(over a period)

4. Statement of cash flow
Summarizes cash inflows and outflows
(over a period)

Question 5

Financial accounting is a system that reports financial … / where?

Answer 5

Position

• at a Point in time
• Balance Sheet

Performance

• over a Period of time
• Statement of .. Cashflow / Equity / Income

Question 6

What is the Accounting Cycle?

• Continuously (3)
• End of Accounting Period (5)

Answer 6

CONTINOUSLY

• Analyze Transactions
  Determine the financial impact of business activities.
• Journalize Transactions
  Record transactions in chronological order in the journal.
• Post to Ledger
  Transfer journal entries to the general ledger accounts.

END OF ACCOUNTING PERIOD

• Prepare an unadjusted trial balance
• Adjust Accounts
  Make necessary adjustments at the end of the accounting period.
• Prepare an adjusted trial balance
• Prepare Financial Statements
  Compile adjusted balances into financial reports.
• Close Temporary Accounts
  Reset temporary accounts for the next period.

Question 7

What is an account and how is it used to track financial transactions

• Definition
  What is a journal entry in accounting? (3)
• Various types of accounts! (5)

Answer 7

Transactions are recorded in chronological order in debits and credits in at least two accounts (Double-entry system).

A record of increases and decreases, for each ..

ACTIV

• Asset (A):Vermögenswert
• Liability (L):Verbindlichkeit
• Equity (SE): Eigenkapital

PASSIV

• Revenue (R): Einnahmen/Erträge
• Expense (E): Ausgaben/Kosten

Question 8

What are two common accounting documents? (2)

• How are they used in the accounting process?

Answer 8

General journal:

• Tabular, chronological record where business activities are
• captured in debits and credits

General ledger (the T accounts):

• Listing of all accounts and their balances,
• Accounts are grouped in five elements (Assets, Liabilities, Equity, Revenues, Expenses)

Question 9

⭐How is the General Ledger structured and organized in accounting? (4)

Answer 9

Assets (A)

• current asset’s
• fixed assets

Liabilities (L)

• short term liabilities
• long term liabilities

Equity (SE)
Income Statement Acc. (R/E)