1. Accounting for Non-
Accounting presentation
Present by:
Alireza Pakzad
Ph.D. in Accounting

2. Course Description
• 1-What is Accounting?
• 2-Who are Accounting users?
• 3-What information can be provided by Accounting?
• 4-How Accounting information can be used?
• 5-What is Accounting process?
• 6-What is the role of Accounting in operating performance
control?

3. Course Objectives
• 1-Understand the source of Accounting information.
• 2-Understand fundamental concepts of Accounting.
• 3-Understand how financial information are used in the
management decision-making process.
• 4-Interpret accounting and financial data and the result of
business operation.
• 5-use Accounting and Financial data to control the
operation.

4. Course Topics
• 1-Introducing Accounting and Financial Statements
• 2-Generally Accepted Accounting Principles
• 3-The Balance Sheet and its Components
• 4-The Income Statement
• 5-Preparing and using a Statement of Cash Flows
• 6-Double-Entry Accounting
• 7-The Corporations

5. Course Topics
• 8-Using Financial Statements for Short-Term Analysis
• 9-Using Financial Statements for Long-Term Analysis
• 10-Budgeting for using in Business
• 11-Audit and Auditors
• 12-Ethics in Accounting
• 13-Managerial Accounting

6. Course Schedule
• Session 1,2:
• Introducing Accounting and Financial Statements
• - What is Accounting
• - Who use Accounting Information
• - Financial Statements

7. Accounting
•It is an information system that reports on the
economic activities
•and financial condition of a business or other
organization.
-Accounting is the language of business
•There needs to be a system or set of rules so you are
able to compare entities to each other.

8. Four financial statements
• Balance sheet
• Income statement (profit/loss)
• Statement of cash flows
• Statement of changes in equity

9. Assets
Liabilities
+ Equity
Accounting Equation
Liabilities Equity
Assets = +

10. Course Schedule(cont…)
• Sessions 3,4:
• Generally Accepted Accounting Principles
• - Who are the SEC, AICPA and FASB
• - What is Generally Accepted Accounting
Principles(GAAP)

11. 11
Users of Financial Statements
• Investors
• Need information about the profitability, dividend yield and price
earnings ratio
Lenders
• Need information about the profitability and solvency of the
business
• Management
• Need information for planning, policy making and evaluation
• Suppliers and trade creditors
• Need information about the liquidity of business

12. 12
• Government
• Need information about various businesses for statistics and
formulation of economic plan
• Customers
• Interested in long-tem stability of the business and continuance
of the supply of particular products
• Employees
• Interested in the stability of the business to provide
employment, fringe benefits and promotion opportunities
• Public
• Need information about the trends and recent development

13. Financial accounting practice is governed by
concepts and rules known as generally accepted
accounting principles (GAAP).
Generally Accepted
Accounting Principles
Relevant
Information
Affects the decision of
its users.
Reliable Information Is trusted by
users.
Comparable
Information
Used in comparisons
across years & companies.

14. Course Schedule
• Sessions 5,6:
• The Balance Sheet and its Components
• - Understanding The Balance Sheet
• - The Accounting Equation
• - The Components of the Balance Sheet
• - The Transaction Behind the Balance Sheet

15. Introduction to Financial Statements
Describes
where the
enterprise
stands at a
specific date.
Income Statement
Balance Sheet
Statement of Cash Flows

16. Land
Equipment
Buildings
Cash
Vehicles
Store
Supplies
Notes
Receivable
Accounts
Receivable
Resources
owned or
controlled
by a
company
Assets

17. Taxes
Payable
Wages
Payable
Notes
Payable
Accounts
Payable
Creditors’
claims on
assets
Liabilities

18. Owner’s
claim on
assets
Dividends
Contributed
Capital
Retained
Earnings
Equity

19. Course schedule(cont…)
• Sessions 7,8:
• The Income Statement
• - Understanding The income Statement
• - Transactions that affect the Income Statement
• - The Income Statement Illustration

20. Elements of the Income Statement
• Operating income
• Revenues
• Expenses
• Other income (expense)
• Gains
• Losses

21. Introduction to Financial Statements
Depicts the
revenue and
expenses for a
designated
period of time.
Income Statement
Balance Sheet
Statement of Cash Flows

22. QUESTION:
What is revenue?
ANSWER:
A revenue is an inflow of money or
other assets that results from the
sales of goods or services or from
the use of money or property. It is
also called income.

23. QUESTION:
What is an expense?
ANSWER:
An expense is an outflow of cash,
use of other assets, or incurring of a
liability.

24. Course schedule(cont…)
• Sessions 9,10:
• Preparing and using a Statement of Cash Flows
• - What is a Statement of Cash Flows
• - How Cash Flows Statement can be provided
• - The Statement of Cash Flows Illustration

25. Cash Flow Statement
A cash flow statement is a summary of the cash
receipts and payments for a specific period of time.

26. CASH
OUTFLOWS
Operating
Activities
Financing
Activities
Investing
Activities
CASH
INFLOWS
Financing
Activities
Operating
Activities
Investing
Activities
Statement of Cash Flows

27. Primary Elements of the Statement of Cash Flows
Operating
Activities
Reports the cash effects of the
elements of net income.
Investing
Activities
Reports the cash effects of the
acquisition and disposition of
assets (other than inventory
and cash equivalents).
Financing
Activities
Reports the cash effects of the
sale or repurchase of shares,
the issuance or repayment of
debt securities, and the
payment of cash dividends.

28. Course schedule(cont…)
• Sessions 11,12:
• Double-Entry Accounting
• - The General Journal
• - The General Ledger

29. Source
documents
Record in
Journal
Financial
Statements
Transaction
Analysis
Post to
Ledger
Unadjusted
Trial Balance
Record & Post
Adjusting
Entries
Adjusted
Trial Balance
Close Temporary
Accounts
Post-Closing
Trial Balance
The
Accounting
Processing
Cycle

30. Debits and Credits
• Every transaction must be recorded.
• Every transaction must affect at least two accounts.
• Debits must equal credits.
• The accounting equation must be in balance.

31. Account Name
(Left Side)
Debit
(Right Side)
Credit
Tool to analyze and determine the
balance in a given account
T-Account

32. Course Schedule(cont…)
• Sessions 13,14:
• The Corporations
• - The definition of Corporation
• - What is Capital Stock
• - Dividend and Splits
• - What is Treasury Stock

33. Corporations
Types
C
Corporation
Professional
Corporation
S
Corporation

34. Authorization, Issuance, and Repurchase of Stock
The maximum number
of shares of capital
stock that can be
issued to the public.
Issued
shares are
authorized
shares of
stock that
have been
distributed to
stockholders.
Unissued
shares of
stock are
shares that
have never
been
distributed to
stockholders.
Unissued
Shares
Treasury
Shares
Outstanding
Shares
Issued
Shares
Treasury shares are
issued shares that have
been reacquired by the
corporation.
Outstanding shares are
issued shares that are
owned by stockholders.
Authorized
Shares

35. 1. Cash dividends.
2. Property dividends.
All dividends, except for stock dividends, reduce the
total stockholders’ equity in the corporation.
3. Liquidating dividends.
4. Stock dividends.
Types of Dividends
Dividend Policy

36. Course Schedule(cont…)
• Sessions 15,16:
• Using Financial Statements for Short-Term Analysis
• - Using Short- Term Ratios
• - Current and Quick Ratios
• - Other Short-Term Analytical Ratios

37. Financial Analysis
•Assessment of the firm’s past, present and future
financial conditions
•Done to find firm’s financial strengths and
weaknesses
•Primary Tools:
•Financial Statements
•Comparison of financial ratios to past, industry,
sector and all firms

38. Framework for Financial Analysis
A Financial
Manager
must consider
all three
jointly when
determining
the financing
needs of the
firm.
Determining
the
financing
needs of
the firm.
1. Analysis of the funds
needs of the firm.
2. Analysis of the financial
condition and profitability
of the firm.
3. Analysis of the business
risk of the firm.

39. Financial Ratio Analysis
• Financial ratio analysis is the use of relationships among financial statement
accounts to gauge the financial condition and performance of a company.
• We can classify ratios based on the type of information the ratio provides:
Activity Ratios
Effectivenes
s in putting
its asset
investment
to use.
Liquidity Ratios
Ability to
meet short-
term,
immediate
obligations.
Solvency Ratios
Ability to
satisfy debt
obligations.
Profitability
Ratios
Ability to
manage
expenses to
produce
profits from
sales.

40. Course Schedule(cont…)
• Sessions 17,18:
• Using Financial Statements for Long-Term Analysis
• - Quality of Earnings
• - Rate of Return on Investments(ROI)
• - Sales-Based Ratios
• - Other Long-Term Analytical Ratios

41. Profitability Ratios
Return on Equity
Net Profit after Taxes
Shareholders’ Equity
Indicates the profitability to
the shareholders of the firm
(after all expenses and
taxes).
Income Statement /
Balance Sheet
Ratios
Profitability Ratios
$91
$1,139
= .08

42. Common-size Analysis
An analysis of percentage financial
statements where all balance sheet
items are divided by total assets and
all income statement items are
divided by net sales or revenues.

43. Common Size Balance Sheets
Regular (thousands of $) Common-Size (%)
Assets 2005 2006 2007 2005 2006 2007
Cash 148 100 90 12.10 4.89 4.15
AR 283 410 394 23.14 20.06 18.17
Inv 322 616 696 26.33 30.14 32.09
Other CA 10 14 15 0.82 0.68 0.69
Tot CA 763 1,140 1,195 62.39 55.77 55.09
Net FA 349 631 701 28.54 30.87 32.32
LT Inv 0 50 50 0.00 2.45 2.31
Other LT 111 223 223 9.08 10.91 10.28
Tot Assets 1,223 2,044 2,169 100.0 100.0 100.0

44. Course Schedule(cont…)
• Sessions 19,20:
• Budgeting for using in Business
• - What is Budget
• - Planning and Control
• - Advantages of Budgeting
• - The Master Budget
• - Capital Budget
• - Other Useful Budgeted Statements

45. Planning and Control
Planning –
involves
developing
objectives and
preparing various
budgets to achieve
those objectives.
Control –
involves the steps taken
by management to
increase the likelihood
that the objectives set
down while planning are
attained and that all
parts of the organization
are working together
toward that goal.

46. Advantages of Budgeting
Advantages
Define goals
and objectives
Uncover potential
bottlenecks
Coordinate
activities
Communicate
plans
Think about and
plan for the future
Means of allocating
resources

47. Types of Budgets
Strategic plan Long-range planning
Capital budget
Master budget
Continuous budget

48. Course Schedule(cont…)
• Sessions 21,22:
• Audit and Auditors
• - What is an Audit
• - Types of Auditors
• - Audit Report

49. External Audit Report and Plan of Action
Identify gaps
Record results
and actions
Write report
Plan corrective
actions
Develop timeline
Assign responsibility
Laboratory understands
recommendations
Auditor’s
closing
summary
and
report

50. Condition Unqualified Qualified Disclaimer Adverse
Limit on audit
scope
Immaterial Material
Highly
Material
Departure
from GAAP
Immaterial Material
Highly
Material
Lack of
Independence
Only
report
Type of Report
Audit reports

51. Flexible
Costs less
Internal Audit
required by ISO standards
conducted on a regular basis
conducted when problems identified
Look at
your own
processes

52. Course Schedule(cont…)
•Ethics in Accounting
•- What is Ethics
•- Why using Ethics is important in Accounting

53. Importance of Ethics in Accounting
Fraud
Fraudis an intentional deception, misappropriation of a
company’s assets, or manipulation of its financial data to
advantage of perpetrator.
Symptoms can include:
•Key executives appearing to be living beyond their means.
•Key executives have close associations with suppliers.
•Company uses several different banks, none sees full financial picture.
•One or two individuals dominate the company.

54. Five Internal Control Components: SAS 78 / COSO
1. Control environment
2. Risk assessment
3. Information and communication
4. Monitoring
5. Control activities

55. Conclusion
Situational
Pressure
Opportunities
Effective Ethical Control
Personal
Integrity
Effective Internal Controls

56. Course Schedule(cont…)
• Sessions 25,26,27:
• Managerial Accounting
• - What is Managerial Accounting
• - Cost-Volume-Profit(CVP) Analysis
• - Break-Even-Point(BEP) Analysis
• - Capital Investment Analysis

57. Managerial accounting is the process
of
 Identifying
 Measuring
 Analyzing
 Interpreting
 Communicating information
Define Managerial Accounting

58. Objectives
Measure the cost of
resources consumed.
Identify and eliminate
non-value-added costs.
Cost Management Systems
Cost
Management
System

59. Managerial versus Financial Accounting
Accounting System
Managerial Accounting
Information for decision
making, planning, and
controlling an
organization’s
operations.
Financial Accounting
Published financial
statements and other
financial reports.
Internal
Users
External
Users

60. Major Themes in Managerial Accounting
Managerial
Accounting
Information
and Incentives
Costs and
Benefits
Evolution and
Adaptation
Behavioral
Issues

61. Product
Types of Cost Classifications by Function
Direct
Labor
Direct
Material
Manufacturing
Overhead
Period costs are expenses not attached to the product.
Administrative costs are
non-manufacturing costs
of staff support and
administrative functions.
Selling costs are incurred to
obtain orders and to deliver
finished goods to customers.

62. What is the
break-even
point?
Revenues Costs
=
Break-even

63. Manufacturing Cost Flows
Selling and
Administrative
Period
Costs
Finished
Goods
Cost of
Goods
Sold
Selling and
Administrative
Manufacturing
Overhead
Work in
Process
Direct Labor
Balance Sheet
Costs Inventories
Income
Statement
Expenses
Material Purchases Raw Materials
1-63

64. Course Grading
Deliverable Grade
Quizzes 25%
Each week’s assignment is equally weighed, and then summed for the final quiz
grade.
Case Study 25%
Each student will prepare and present a case study to the rest of the class
Exam 1 25% (Closed Book and Note)
Exam 2 25% (Closed Book and Note)