Bucharest University of Economic Studies

Faculty of Business Administration in Foreign Languages-

English track

Financial Accounting- 2018

Adriana Dutescu, Prof. , PhD

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 Adriana Dutescu

Education:
•Bled School of Management, Slovenia
•University of Ottawa & HEC University, Canada
•Universite d’Orleans, France
•University of Reading – Great Britain
•Universite des Sciences Sociales de Toulouse-France
•Bucharest University of Economic Studies, Romania
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Adriana Dutescu

Professional qualifications:
•Charted accountant
•Charted financial auditor
•Charted tax consultant

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Adriana Dutescu

Academic qualifications:
•Professor
•PhD tutor

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 Financial Accounting Course
Content

TOPIC I: Introduction & recap

TOPIC II: Conceptual framework of financial
statements
TOPIC III: The statement of the financial position
(balance sheet)
TOPIC IV: The income statement and other
comprehensive income (Profit & Loss Account/Income
Statement)
TOPIC V: The Statement of Changes in the Financial
position (the Cash-flow-statement) 5
 Financial Accounting Course
Content

TOPIC VI: The statement of changes in equity

TOPIC VII: Non-current assets
TOPIC VIII: Current assets
TOPIC IX: Sources of capital: non-current liabilities
TOPIC X: Current liabilities
TOPIC XI: Special cases: provisions
TOPIC XII: Sources of capital: equity
TOPIC XIII: Financial analysis 6
 Financial Accounting Course

GRADE COMPOSITION:
•30% SEMINAR MARK
•70% FINAL EXAM MARK

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 Financial Accounting Course

COURSE OBJECTIVES:
• get familiar with key accounting principles, concepts
& techniques
•understand, apply and use the financial information to
fundament in the decision making process
•able to provide basic financial analysis
• be aware of cultural differences of various financial
statements & disclosure patterns

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 Financial Accounting

Accounting & financial scandals

http://www.youtube.com/watch?v=7g_d-phoUrU

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 Financial Accounting

Why do we need accounting ?

•information system
•communication tool

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 Financial Accounting

Why do we need accounting ?

•financial information – a
commodity

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 Financial Accounting

Who needs the accounting information?

•Investors
•Creditors
•Suppliers & clients
•State
•General public 12
 Financial Accounting
Accounting profession:
•IFAC-International Federation of Accountants
•FEE- Federation of European Accounting Experts
•CECCAR-the Body of Licensed & Chartered
Accounts of Romania
•CAFR- Romanian Chamber of Financial Auditors
•CCFR- Romanian Chamber of Tax Consultants

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 Legal & accounting framework

 Corporate (company’s) act & specific

accounting laws/regulations

 Accounting framework:
– Local accounting standards
– IFRS
– US GAAP
– UK GAAP
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 Romania: regulations & framework

 European Directive 2013/34/UE on the annual

financial statements, consolidated financial
statements and related reports of certain types
of undertakings
 Order 1802/2014 on the approval of accounting
regulations for individual and consolidated
annual financial statements (Ministry of
Finance)
 Law of 15Accounting, no. 82/1991
Organisational chart

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 Differences between financial and management
accounting

Financial accounting Management accounting

information information
 for the use of managers  for internal use only
and external parties  flexible formats of
 compulsory formats of presentation
presentation  based on business
 based on GAAP requirements
 historical  dynamic

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 Financial Accounting
Financial statements:
•Statement of financial position (Balance sheet)
•Income statement/Profit & Loss Account
•Statement of Cash Flows
•Statement of Changes in Equity
•Notes
•Others 18
 The Balance Sheet
HOLDEN COMPANY
Balance Sheet As of December 31, 2009
(000 omitted)

Assets Liabilities and Owners’ Equity

Noncurrent assets: Noncurrent liabilities:
Property, plant, equipment Long-term debt, less
at cost $26,946 current portion $ 2,000
Less: Accumulated Deferred income taxes 824
Depreciation 13,534 Total liabilities 12,343
Property, plant, equipment
net 13,412 Owners’ equity:
Investments 1,110 Common stock 1,000
Patents and trademarks 403 Additional paid-in capital 11,256
Goodwill 663 Total paid-in capital 12,256
Retained earnings 13,640
Total of capitalized assets 15,588 Total owners’ equity 25,896

Non- current Section

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 The Balance Sheet
HOLDEN COMPANY
Balance Sheet
As of December 31, 2009
(000 omitted)
Assets Liabilities and Owners’ Equity
Current assets: Current liabilities:
Cash $ 1,449 Accounts payable $ 5,602
Marketable securities 246 Bank loan payable 1,000
Accounts receivable, net 9,944 Accrued liabilities 876
Inventories 10,623 Estimated tax liability 1,541
Prepaid expenses 389 Current portion of long-
term debt 500
Total current assets $22,651 Total current liabilities $ 9,519
Total liabilities and owners’
Total assets $38,239 and owners’ equity $38,239

Current Section
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 Income Statement
By function/destination

HOLDEN COMPANY
Income Statement
For the Year 2009
(000 omitted)

Sales revenue $75,478

Less cost of sales (-)52,227
Gross margin 23,251
Less operating expenses (-)10,785
Income before taxes 12,466
Expenses for income taxes (-) 6,344
Net income $ 6,122

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 Income Statement
By nature

HOLDEN COMPANY
Income Statement
For the Year 2009
(000 omitted)

Sales revenue $75,478

Less cost of sales (-)52,227
Less operating expenses (-)10,785
Income before taxes 12,466
Expenses for income taxes (-) 6,344
Net income $ 6,122

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 Financial Statement Objectives
Financial reporting should provide
information:

 about the financial position of the company

 about the performance of the company
 about the change in the financial position of
the company

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 A “Package” of Accounting Reports

Condensed Balance Sheet

As of December 31, 2008
Assets
Current assets $22,651
Building and equip. 13,412
Other assets 2,176
Total assets $38,239

Liabilities and Owners’ Equity

Liabilities $12,343
Owners’ Equity
Paid-in capital 12,256
Retained earnings 13,640
Total liabilities and
owners’ equity $38,239
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 A “Package” of Accounting Reports- American way

Income Statement
Condensed Balance Sheet For the Year 2009
As of December 31, 2008 Sales revenue $75,478
Assets Less cost of sales 52,222
Gross margin 23,351
Current assets $22,651
Less operating exp. 10,785
Building and equip. 13,412
Income before taxes 12,466
Other assets 2,176
Provision for taxes 6,344
Total assets $38,239
Net income, 2000 $ 6,122
Liabilities and Owners’ Equity
Liabilities $12,343
Owners’ Equity
Paid-in capital 12,256
Retained earnings 13,640
Total liabilities and
owners’ equity $38,239
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 A “Package” of Accounting Reports- American way

Income Statement
For the Year 2009
Condensed Balance Sheet
As of December 31, 2008 Sales revenue $75,478
Assets Less cost of sales 52,222
Gross margin 23,351
Current assets $22,651 Less operating exp. 10,785
Building and equip. 13,412 Income before taxes 12,466
Other assets 2,176 Provision for taxes 6,344
Total assets $38,239 Net income, 2000 $ 6,122
Liabilities and Owners’ Equity Statement of Retained Earnings
Liabilities $12,343
Owners’ Equity Retained earnings $13,640
Paid-in capital 12,256 Add net income 6,122
Retained earnings 13,640 19,762
Total liabilities and Less dividends 4,390
owners’ equity $38,239 Retained earnings $15,372
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 A “Package” of Accounting Reports- American way

Income Statement
Condensed Balance Sheet For the Year 2009
As of December 31, 2008 Sales revenue $75,478
Assets Less cost of sales 52,222
Gross margin 23,351
Current assets $22,651
Less operating exp. 10,785
Building and equip. 13,412
Income before taxes 12,466
Other assets 2,176
Provision for taxes 6,344
Total assets $38,239
Net income, 2000 $ 6,122
Liabilities and Owners’ Equity
Statement of Retained Earnings
Liabilities $12,343
Owners’ Equity Retained earnings $13,640
Paid-in capital 12,256 Add net income 6,122
Retained earnings 13,640 19,762
Total liabilities and Less dividends 4,390
owners’ equity $38,239 Retained earnings $15,372
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 A “Package” of Accounting Reports- American way

Condensed Balance Sheet

As of December 31, 2009
Assets
Current assets $24,062
Building and equip. 14,981
Other assets 3,207
Total assets $42,250

Statement of Retained Earnings Liabilities and Owners’ Equity

Liabilities $14,622
Retained earnings $13,640 Owners’ Equity
Add net income 6,122 Paid-in capital 12,256
19,762 Retained earnings 15,372
Less dividends 4,390 Total liabilities and
Retained earnings $15,372 owners’ equity $42,250

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 A “Package” of Accounting Reports- American way

Condensed Balance Sheet

As of December 31, 2009
Assets
Current assets $24,062
Building and equip. 14,981
Other assets 3,207
Total assets $42,250

Statement of Retained Earnings Liabilities and Owners’ Equity

Liabilities $14,622
Retained earnings $13,640 Owners’ Equity
Add net income 6,122 Paid-in capital 12,256
19,762 Retained earnings 15,372
Less dividends 4,390 Total liabilities and
Retained earnings $15,372 owners’ equity $42,250

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 Conclusion
An organization has four types of accounting
information:
 Operating information, which has to do with the
details of operations
 Management accounting information, which is
used internally for planning, implementation, and
control
 Financial accounting information, which is used
both by management and external parties
 Tax accounting information, which is used to file
tax returns with taxing authorities
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