Fakultas Ekonomi
Introduction to
Accounting and
2. Summarize the development of accounting principles and relate them to practice.
3. State the accounting equation and define each element of the equation.
transactions can be recorded in terms of the resulting change in the basic elements of the accounting equation.
Describe the nature of a
business and the role of ethics
and accounting in business.
Service Business Service
Plaza Indonesia Realty Tbk. Shopping mall Hotel Sahid Jaya Tbk. Hospitality and
lodging
Bank Mandiri Tbk. Financial services Garuda Indonesia Transportation
Merchandising Business Product
Matahari Putra Prima Tbk. Clothes and apparel Hero Supermarket Tbk. Food and groceries
Manufacturing Business Product
Sepatu Bata Tbk. Shoes
Mustika Ratu Tbk. Cosmetics Gudang Garam Tbk. Cigarettes
Proprietorship
Partnership
Corporation
Most of Business entities in Indonesia is proprietorship
Cost of organizing is low
Is limited to financial resources of the owner.
In Indonesia we know firma and CV as two types of partnership. Firma and CV will be discussed more in chapter 12.
Combines the skills and resources of more than one person.
A partnership is similar to a proprietorship except that it is owned by two or more
A
corporation
is organized under
government statues as a separate legal
Includes ownership divided into shares of stock, sold to shareholders
(stockholders).
Is able to obtain large amounts of resources by issuing stock.
Is owned by a group of people (named as member). Cooperatives mainly are
organized by and for member only. For example Employee Cooperatives
(Koperasi Karyawan), Milk Farmer
A
business stakeholder
is a
person or entity having an
interest in the economic
Capital market stakeholders
provide the major financing for the
business in order for the business to
Product or service market
stakeholders
include customers
who purchase the business’s
products or services as well as
the vendors who supply inputs to
Government stakeholders
have an
interest in the economic
performance of a business.
Provincial governments collect
taxes from businesses within their
Internal stakeholders
include
individuals employed by the
business. Managers have an
incentive to maximize the
economic value of the business.
Employees have an interest
The moral principles that guide
the conduct of individuals are
1. Individual character
2. Firm culture
3. Laws and
enforcement
The answer to
“What went
wrong for these
companies?”
(Exhibit 2) involves three
Accounting
can be defined as an
information system that provides
reports to stakeholders about the
economic activities and
The process by which accounting provides
information to business stakeholders is as follows:
Identify stakeholders.
Assess stakeholders’ information needs.
Design the accounting information system to
meet stakeholders’ needs.
Record economic data about business activities and events.
Financial accounting is primarily concerned with the recording and reporting of economic
data and activities for a business.
Managerial accounting uses both financial accounting and estimated data to aid
management in running day-to-day
Accountants employed by a business firm or a not-for-profit organization are said to be
employed in private accounting.
Accountants and their staff who provide services on a fee basis are said to be
Summarize the development
of accounting principles and
relate them to practice.
The
business entity concept
limits the economic data in
the accounting system to
data related directly to the
The
cost concept
is the
basis for entering the
exchange price, or cost
The
objectivity concept
requires that the accounting
records and reports be based
The
unit of measure
concept
requires that
On August 25, Bengkel Agung Jaya extended an offer of Rp125,000,000 for land that had been priced for sale at
Rp150,000,000. On September 3, Bengkel Agung Jaya accepted the
seller’s counteroffer of Rp137,000,000. On October 20, the land was
assessed at a value of Rp98,000,000 for property tax purposes. On December 4, Bengkel Agung Jaya was offered Rp160,000,000 for the land by a national retail chain. At what value should the land be
recorded in Bengkel Agung Jaya’s records?
State the accounting
equation and define each
element of the equation.
Assets = Liabilities + Owner’s Equity
The resources owned by a
The rights of the creditors, which
represent debts of the business
The rights of the owners
The following accounts appear in the adjusted trial balance of Hindsight Consulting. Indicate whether each account would be reported in the (a) current asset; (b) property, plant, and
equipment; (c) current liability, (d) long-term liability; or (e) owner’s equity section of the December 31, 2007, balance sheet of Hindsight Consulting.
Example Exercise 1-2
Asep Sunarya is the owner and operator of Pasti Sukses, a motivational consulting business. At the end of its accounting period, December 31, 2007, Pasti Sukses has assets of Rp800,000,000 and liabilities of Rp350,000,000. Using the accounting equation, determine the following amounts:
a. Owner’s equity, as of December 31, 2007.
b. Owner’s equity, as of December 31, 2008, assuming that assets
increased by Rp130,000,000 and liabilities decreased by Rp25,000,000 during 2008.
Follow My Example 1-2
a. A = L + OE
Rp800,000,000 = Rp350,000,000 + OE OE = Rp450,000,000
b. A = L + OE
Describe and illustrate how
business transactions can be
recorded in terms of the resulting
change in the basic elements of the
A
business transaction
is an
economic event or condition that
directly changes an entity’s
On November 1, 2007, Cinta
Cita begins a business that will
be known as
SolusiNet
.
a. Cinta Cita deposits Rp25,000,000 in a Cinta Cita, Capital
25,000,000
Investment by Cinta Cita
Cash
25,000,000
a.
=
b. SolusiNet exchanged Rp20,000,000 for
Cinta Cita, Capital
25,000
Cash + Land
25,000 Bal.
Owner’s Equity
=
=
b. –20,000 +20,000
Accounts Cinta Cita, Cash + Supplies + Land Payable Capital
Assets
c. During the month, SolusiNet purchased
supplies for Rp1,350,000 and agreed to pay the supplier in the near future (on
Owner’s Liabilities + Equity
=
5,000 20,000 = 25,000
+1,350 +1,350
c.
Bal.
Beginning with entry (d) the asset section will be shown first, then the liabilities and
owner’s equity will be shown in
Cash + Supplies + Land Assets
5,000 1,350 20,000
d. SolusiNet provided services to
customers, earning fees of Rp7,500,000
Bal.
12,500 1,350 20,000
+7,500 d.
d. SolusiNet provided services to
customers, earning fees of Rp7,500,000 Accounts Cinta Cita, Fees
Payable Capital + Earned
1,350 25,000 Bal.
+7,500 d.
+
The amounts used in earning revenue are called expenses. Adding expenses to the
owner’s equity section results in a space
problem. To adjust for these added
headings, the word “Bal.” has been omitted
from Slides 48, 50, 52, and 54. The bottom row in these four slides provides
Cash + Supplies + Land
e. SolusiNet paid the following expenses: wages, Rp2,125,000; rent, Rp800,000;
Bal. 12,500 1,350 20,000
Bal. 8,850 1,350 20,000
Accounts Cinta Cita, Fees Wages Rent Utilities Misc. Payable + Capital + Earned Expense Expense Expense Expense
Liabilities + Owner’s Equity
1,350 25,000 7,500
–2,125 –800 –450 –275 e.
1,350 25,000 7,500 –2,125 –800 –450 –275
Cash + Supplies + Land
Bal. 8,850 1,350 20,000
Bal. 7,900 1,350 20,000
Accounts Cinta Cita, Fees Wages Rent Utilities Misc. Payable + Capital + Earned Expense Expense Expense Expense
Liabilities + Owner’s Equity
1,350 25,000 7,500 –2,125 –800 –450 –275
400 25,000 7,500 –2,125 –800 –450 –275
f. NetSolutions paid Rp950,000 to
f.
g. At the end of the month, the cost of supplies on hand is Rp550,000,
Cash + Supplies + Land
Bal. 7,900 1,350 20,000
Bal. 7,900 550 20,000
Accounts Cinta Cita, Fees Wages Rent Supplies Util. Misc. Payable + Capital + Earned Exp. Exp. Exp. Exp. Exp.
Liabilities + Owner’s Equity
400 25,000 7,500 –2,125 –800 –450 –275
g. At the end of the month, the cost of supplies on hand is
Rp550,000, so Rp800,000 of
g.
–800
Cash + Supplies + Land
Bal. 7,900 550 20,000
Bal. 5,900 550 20,000
h. –2,000
Accounts Cinta Cita, Cinta Cita Fees Wages Rent Supplies Util. Misc. Payable + Capital + Drawing Earned Exp. Exp. Exp. Exp. Exp.
Liabilities + Owner’s Equity
400 25,000 7,500 –2,125 –800 –800 –450 –275
h.
–2,000
h. At the end of the month, Cinta
withdrew Rp2,000,000 in cash from
Owner’s withdrawals
Expenses
Decreased by Increased by
Owner’s investments
Example Exercise 1-3
Simatupang Express is owned and operated by Bonar Simatupang. The following selected transactions were completed by Simatupang Express during February:
1. Received cash from owner as additional investment, Rp35,000,00.
2. Paid creditors on account, Rp1,800,000.
3. Billed customers for delivery services on account, Rp11,250,000.
4. Received cash from customers on account, Rp6,740,000.
Indicate the effect of each transaction on the accounting
equation elements (Assets, Liabilities, Owner’s Equity,
Drawing, Revenue, and Expense) by listing the numbers identifying the transactions, (1) through (5). Also, indicate the specific item within the accounting equation element that is affected. To illustrate, the answer to (1) is shown below.
Follow My Example 1-3
(2) Asset (Cash) decreases by Rp1,800,000; Liability (Accounts Payable) decreases by Rp1,800,000.
(3) Asset (Accounts Receivable) increases by Rp11,250,000; Revenue (Simatupang Express) increases by
Rp11,250,000.
(4) Asset (Cash) increases by Rp6,740,000; Asset (Accounts Receivable) decreases by Rp6,740,000.
Describe the financial
statements of a proprietorship
and explain how they
Accounting reports, called
The
income
statement
is
a summary of the revenue
and expenses
for a
specific period of time
,
Fees earned Rp7 500 000 Expenses:
Wages expense Rp2 125 000 Rent expense 800 000 Supplies expense 800 000 Utilities expense 450 000 Miscellaneous expense 275 000
Total expenses 4 450 000
Net income Rp3 050 000
SolusiNet Income Statement
For the Month Ended November 30, 2007
Net income is carried to the
A
statement of owner’s equity
is a summary of the changes
in the owner’s equity that have
occurred
during a specific
Cinta Cita, capital, November 1, 2007 Rp 0 Investment on November 1, 2007 Rp25 000 000
Net Income for November 3 050 000 Rp28 050 000 Less withdrawals 2 000 000
Increase in owner's equity 26 050 000 Cinta Cita, capital, November 30, 2007 Rp26 050 000
SolusiNet
Statement of Owner's Equity
For the Month Ended November 30, 2007
A
balance sheet
is a list of
the assets, liabilities, and
owner’s equity
as of a
Assets Liablities
Cash Rp 5 900 000 Accounts Payable Rp 400 000 Supplies 550 000 Owner's Equity
Land 20 000 000 Cinta Cita, capital 26 050 000 Total Liabilities and
Total assets Rp26 450 000 Owner's equity Rp26 450 000
SolusiNet Balance Sheet November 30, 2007
This amount is compared to the From the statement
A
statement of cash flows
is a summary of the cash
receipts and payments
for
Cash flows from operating activities
Cash received from customers Rp 7 500 000 Deduct cash payments for expense and
payments to creditors 4 600 000
Net cash flow from operating activities Rp 2 900 000 Cash flows from investing activities
Cash payments for purchase of land (20 000 000) Cash flows from financing activities
Cash received as owner's investmentsRp25 000 000 Deduct cash withdrawal by owner 2 000 000
Net cash flow from financing activities 23 000 000 Net cash flow and November 30, 2007, cash balance Rp 5 900 000
SolusiNet
Statement of Cash Flows
For the Month Ended November 30, 2007
The income statement reports the revenues and expenses for a period of
time based on the matching concept. This concept is applied by matching the
The excess of revenue over
the expenses is called
net
income
or
net profit
. If the
expenses exceed the revenue,
The assets and liabilities of Cimande Travel Service at April 30, 2008, the end of the current year, and its revenue and expenses for the year are listed below. The capital of the owner, Adam
Kuncoro, was Rp80,000,000 at May 1, 2007, the beginning of the current year.
Follow My Example 1-4
CIMANDE TRAVEL SERVICE
INCOME STATEMENT
For the Year Ended April 30, 2008
Fees earned Rp263,200,000
Expenses:
Wages expense Rp131,700,000 Office expense 63,000,000 Miscellaneous expense 12,950,000
Total expenses 207,650,000
The statement of owner’s
equity reports the changes in
the owner’s equity for a period
of time. It is prepared
after
the
Example Exercise 1-5
Using the data for Cimande Travel Service shown in Example Exercise 1-4, prepare a statement of
owner’s equity for the current year ended April 30,
2008. Adam Kuncoro invested an additional
CIMANDE TRAVEL SERVICE
STATEMENT OF OWNER’S EQUITY
For the Year Ended April 30, 2008
Adam Kuncoro, capital, May 1, 2007 Rp 80,000,000 Additional investment by owner during year Rp 50,000,000
Net income for the year 55,550,000 Rp 105,550,000 Less withdrawals 30,000,000
The balance sheet reports
the amounts of a firm’s
assets, liabilities, and
owner’s equity at the end
The
account form
of balance
sheet lists the assets on the left
and the liabilities and owner’s
equity on the right
—
similar to
The
report form
of balance
sheet presents the liabilities
and owner’s equity sections
Using the data for Cimande Travel Service shown in Example
Exercise 1-4 and 1-5, prepare the balance sheet as of April 30, 2008.
Follow My Example 1-6
CIMANDE TRAVEL SERVICE
BALANCE SHEET
April 30, 2008
Assets Liabilities
Cash Rp 53,050,000 Accounts payable Rp 12,200,000 Accounts receivable 31,350,000
Supplies 3,350,000 Owner’s Equity
The statement of cash flows
consists of three sections:
(1) Operating activities
(2) Investing activities
The cash flows from
operating activities section reports a summary of cash receipts and cash payments
The cash flows from investing activities section reports the cash
The cash flows from financing activities section reports the cash transactions related to cash
A summary of cash flows for Cimande Travel Service for the year ended April 30, 2008, is shown below.
Cash receipts:
Cash received from customers Rp 251,000,000 Cash received from additional
investment of owner 50,000,000 Cash payments:
Cash paid for expenses 210,000,000 Cash paid for land 80,000,000 Cash paid to owner for personal use 30,000,000
For the Year Ended April 30, 2008
Cash flows from operating activities:
Cash received from customers Rp251,000,000 Deduct cash payments for expenses 210,000,000
Net cash flows from operating activities Rp 41,000,000 Cash flows from investing activities:
Cash payments for purchase of land (80,000,000) Cash flows from financing activities:
Cash received from owner as investment Rp 50,000,000 Deduct cash withdrawals by owner 30,000,000
The income statement and the statement
of owner’s equity are interrelated.
The statement of owner’s equity and
the balance sheet are interrelated.
The owner’s capital at the end of the period on the statement of owner’s
equity also appears on the balance
The balance sheet and the statement
of cash flows are interrelated.
The cash on the balance sheet also appears as the end-of-period cash on
