Introducing Financial Accounting - CCSN Computer Graphics Program

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$Distance Education Math 120 Syllabus - College of Southern Nevada$

wiL27041_ch01_002-047.indd Page 3 10/4/10 7:12:03 PM user-f499 /Volumes/204/MHBR211/wiL27041_disk1of1/0073527041/wiL27041_pagefiles Decision Insight A Decision Feature launches each chapter showing the relevance of accounting for a real entrepreneur. An Entrepreneurial Decision problem at the end of the assignments returns to this feature with a mini-case. “We are focused on . . . helping people share information“ Accounting for Facebook PALO ALTO, CA—“Open Society” conjures up philosophical thoughts and political ideologies. However, for Mark Zuckerberg, his vision of an open society “is to give people the power to share and make the world more open and connected.” That vision led Mark to create Facebook (Facebook.com) from his college dorm. Today, Facebook is the highest-profile social networking site. Along the way, Mark had to learn accounting and the details of preparing and interpreting financial statements. “It’s all been very interesting,” says Mark. Important questions involving business formation, transaction analysis, and financial reporting arose. Mark answered them and in the process has set his company apart. “I’m here to build something for the long term,” declares Mark. “Anything else is a distraction.” Information is the focus—both within Facebook and within its accounting records. Mark recalls that when he launched his business, there were “all these reasons why they could not aggregate this [personal] information.” He took a similar tactic in addressing accounting information. “There’s an intense focus on . . . information, as both an ideal and a practical strategy to get things done,” insists Mark. This includes using accounting information to make key business decisions. While Facebook is the language of social networking, accounting is the language of business networking. “As a company we are —MARK ZUCKERBERG very focused on what we are building,” says Mark. “We are adding a certain amount of value to people’s lives if we build a very good product.” That value is reflected in its financial statements, which are based on transaction analysis and accounting concepts. Facebook’s success is reflected in its revenues, which continue to grow and exhibit what people call the monetizing of social networking. “Social Ads are doing pretty well,” asserts Mark. “We are happy with how we are doing in terms of numbers of advertisers and revenue.” Facebook also tracks its expenses and asset purchases. “We expect to achieve . . . profitability next year,” states Mark. “It means we will be able to fund all of our operations and server purchases from the cash we generate.” This is saying a lot as Facebook’s operating expenditures must support nearly 1 billion photo uploads and 8 million video uploads per day. Mark emphasizes that his financial house must be in order for Facebook to realize its full potential—and that potential is in his sights. “We believe really deeply that if people are sharing more, then the world will be a more open place where people can understand what is going on with the people around them.” [Sources: Facebook Website, January 2011; CNN, October 2008; Mercury News, April 2009; VentureBeat, March 2008; FastCompany.com, May 2007; Wired, June 2009]
wiL27041_ch01_002-047.indd Page 4 10/4/10 7:12:07 PM user-f499 /Volumes/204/MHBR211/wiL27041_disk1of1/0073527041/wiL27041_pagefiles Chapter Preview Today’s world is one of information — its preparation, communication, analysis, and use. Accounting is at the core of this information age. Knowledge of accounting gives us career opportunities and the insight to take advantage of them. This book introduces concepts, procedures, and analyses that help IMPORTANCE OF ACCOUNTING C1 Importance of Accounting • Accounting information users • Opportunities in accounting Explain the purpose and importance of accounting. Real company names are printed in bold magenta. EXHIBIT 1.1 Accounting Activities A Preview opens each chapter with a summary of topics covered. Introducing Financial Accounting Fundamentals of Accounting • Ethics—key concept • Generally accepted accounting principles • International standards us make better decisions, including career choices. In this chapter we describe accounting, the users and uses of accounting information, the forms and activities of organizations, and several accounting principles. We also introduce transaction analysis and financial statements. Transaction Analysis • Accounting equation • Transaction analysis—illustrated Financial Statements • Income statement • Statement of retained earnings • Balance sheet • Statement of cash flows Why is accounting so popular on campuses? Why are there so many accounting jobs for graduates? Why is accounting so important to companies? Why do politicians and business leaders focus on accounting regulations? The answer is that we live in an information age, where that information, and its reliability, impacts the financial well-being of us all. Accounting is an information and measurement system that identifies, records, and communicates relevant, reliable, and comparable information about an organization’s business activities. Identifying business activities requires selecting transactions and events relevant to an organization. Examples are the sale of iPhones by Apple and the receipt of ticket money by TicketMaster. Recording business activities requires keeping a chronological log of transactions and events measured in dollars and classified and summarized in a useful format. Communicating business activities requires preparing accounting reports such as financial statements. It also requires analyzing and interpreting such reports. (The financial statements and notes of Research In Motion, the maker of BlackBerry, are shown in Appendix A near the end of this book. This appendix also shows the financial statements of Apple, Palm, and Nokia.) Exhibit 1.1 summarizes accounting activities. We must guard against a narrow view of accounting. Our most common contact with accounting is through credit approvals, checking accounts, tax forms, and payroll. These experiences are limited and tend to focus on the recordkeeping parts of accounting. Recordkeeping, or bookkeeping, is the recording of transactions and events, either manually or electronically. This is just one part of accounting. Accounting also identifies and communicates information on transactions and events, and it includes the crucial processes of analysis and interpretation. Identifying Recording Communicating Select transactions and events Input, measure, and classify Prepare, analyze, and interpret
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