Lecture 01 - Introduction

Question 1

What is accounting? (2)

Answer 1

Process of recording, summarizing, analyzing, financial transactions

Goal is to support economic decisions

Question 2

Why do we need to learn accounting? (3)

Answer 2

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

Question 3

Financial vs Managerial Accounting

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

Answer 3

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Question 4

Main financial statements (4)

Answer 4

1. Balance sheet
2. Income statement
3. Statement of stockholders’ equity
4. Statement of cash flow

Question 5

Financial accounting is a system that reports financial … (2)

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? (5)

Answer 6

Question 7

What is an account and how is it used to track financial transactions => various types of accounts! (5)

Answer 7

A record of increases and decreases for each

1. Asset (A):Vermögenswert
2. Liability (L):Verbindlichkeit
3. Equity (SE): Eigenkapital
4. Revenue (R): Einnahmen/Erträge
5. 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. (E/R)