Nature and Purpose of Accounting

In: Business and Management

Submitted By vickyhi5
Words 5125
Pages 21
Chapter 1
THE NATURE AND PURPOSE OF ACCOUNTING

Changes from Eleventh Edition

The chapter has been updated. The Maria Hernandez & Associates case has been replaced with the Ribbons an’ Bows Inc. case.

Approach

On the first day, the usual objective is to create interest in the subject, to set the scene, and to give an overview of the course. The first part of the chapter does this. The second part of the chapter gives a fairly specific introduction to the nature of financial accounting. Instructors probably may want to bring in material from their own reading or experience to make the introductory points.

Cases

The cases are intended to get the student to start thinking like accountants and users of accounting information, without knowledge of any of the techniques. Ribbons an’ Bows gives students an opportunity to construct a simple set of financial statements. Kim Fuller can be used as a springboard for any type of discussion: uses of information by various parties, the cost of record-keeping, or even the development of a complete accounting system. Baron Coburg illustrates practically all of the basic accounting concepts, without naming them. It is a difficult case, but enlightening, even for those with some prior accounting training.

Problems

Problem 1-1

|CHARLES COMPANY |
|BALANCE SHEET AS OF DECEMBER 31, ----. |
|Assets | |Liabilities and Owners’ Equity |
|Cash |$ 12,000 | |Bank loan |$ 40,000 |
|Inventory |95,000 | |Owners’ Equity…...

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