Language of the business Assignment PDF

ACC 1701
Accounting for Decision Makers
Lecturer: Dr. Hanny Kusnadi
ACCOUNTING
The language of the business world

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 2
Before moving on to the exciting official stuff that is Accounting,
let’s establish communication among the class and
also discuss some administrative issues.
Welcome to ACC 1701!

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 3
▪ Share with me, and the class, a little about yourself in the following shared google
doc slides (just add on slides into the file):
“Let’s get to know each other – Section LV1”
“Let’s get to know each other – Section LV2”
Please do it after the lecture in your own time.
▪ It’s a really big lecture, so I cannot guarantee I will remember all of you by the end of
the course.
▪ BUT I will try my very very best to!!!
▪ Since we will be spending the next couple of weeks together, I would really like to
get to know all of you.
Who am I + Who are you?

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 4
▪ Class website: https://luminus.nus.edu.sg/
▪ Textbook: “Financial Accounting: IFRS Edition”, 3e by Stice, Stice, Albrecht,
Swain, Duh, and Hsu (Cengage)
▪ Lectures/Tutorials format:
▪ Lectures: ONLINE via Zoom
Weekly tutorials start from Week 3
▪ Tutorials: Hybrid (mix of f2f and online delivery)
Note: Mode of delivery for lectures and tutorials might be subjected to changes depending on the
current safe distancing measures in place. Any changes will be announced to the class.
▪ My office hours: By appointments only.
▪ Email me at [e-mail] to schedule a virtual/f2f meeting.
Some administrative items

▪ Further details on each component are provided on LumiNUS
Assessment
5ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi)
Weight
Class Participation (from tutorials) 20%
Group Project 30%
Final examination 50%
TOTAL 100%

▪ Before each lecture, read the assigned chapter ahead of time and
review the lecture slides before class. This will benefit you.
Tips for surviving this class successfully
6ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi)
▪ After each lecture, review the materials after class. This will help you “digest” the
materials covered.
▪ Attempt the assigned self-study practice problems and review the given solutions
carefully at your own time. This will help to further solidify your understanding of the
materials.
▪ Complete all the assigned tutorial questions before your tutorial sessions and be prepared
to contribute to the discussions during tutorial classes. The quality of tutorials will also
depend on your contributions to the class.
▪ Always raise questions when you have them. Do not let them accumulate as each chapter
builds on prior chapter(s). Make sure you do not let yourself fall behind!
▪ Enjoy and immerse yourself in the wonders of accounting!

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 7
Zoom Lecture Etiquette
▪ Log into sessions 5-10 minutes before lecture time using your NUS Zoom account. Only
authenticated users will be allowed into the zoom session.
▪ Turn on your camera. I would love to see your happy face ☺You are most welcome to use
a virtual background.
▪ Dress appropriately. Clothing is not optional!
▪ Keep audio on mute at all times. You will be given time to ask questions during the break or
after the lecture, unmute yourself during this time to ask questions.
▪ I will NOT monitor or respond to the chat box during lecture.
▪ Questions should be directed to the Discussion forum in LumiNUS.
▪ Avoid doing other tasks not related to lecture. (e.g. checking emails, chatting, playing games)
▪ Inappropriate language will not be tolerated. I will remove students from the zoom session if
you are engaging in inappropriate or distracting behavior.
# 1 Rule to adhere to at all times: BE PROFESSIONAL

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 8
When technology fails us
1) Please do NOT panic!
2) Wait a minute or two and try logging in again to the same zoom lecture link.
3) Please be patient. I could be having connection issues from my side.
4) If after 10 minutes, the zoom session has not restarted, please check your email for
an announcement from me (if I am able to send announcement, I will do so)
5) If after an additional 5 minutes, the zoom session still has not restarted, that
probably means that technology has failed me that day. It is unlikely lecture will
continue, and therefore class is dismissed for the day. I will make a video recording
for the remaining materials not yet covered in the lecture and upload it to
LumiNUS.
Everyone has bad days, and so can Technology.
What to do when the Zoom session stops in the middle of lecture:

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 9
Let’s do some Accounting!
Let’s get started
Show time!

Accounting in Business
& Financial Statements Overview
Chapter 01 & 02

Let’s link to PollEv
Important Note on PollEv
▪ I will be using PollEv frequently throughout my
lectures. The link for all PollEv activities in
class is:
PollEv.com/bizhann
▪ Or scan the QR code.
▪ You may want to bookmark my presentation link
for future lecture.
ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 11

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 12
▪ Andy just graduated from NUS.
▪ He is starting his own artificial intelligence (AI) company providing
automated business solutions.
▪ To grow his business, he needs $10 million!
▪ BUT, the ten million dollar question is:
Where can Andy get $10 million?
The need for Accounting:
Andy’s AI Company
• Personal savings
• Family & friends
• Bank loan
• Private investors
• Go Public!

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 13
Importance of Accounting
Andy’s AI Company:
▪ How can Andy convince people to invest in his company?
▪ Without RELIABLE FINANCIAL STATEMENTS, he can’t!!!
▪ What can Andy’s financial statements tell investors about his company?
- What resources & obligations does the company has?
- How much money does the business make? or will make?
▪ Financial statements reports economic information to users
▪ Accounting is the system used to identify, record, and communicate
quantitative information, primarily financial in nature, about a business
organization that is useful for decision making.
Accounting is the language of the business world!

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 14
Do you speak accounting?
US$200B revenues in 2020!!!
▪ Accounting helps us to better understand the business world!
▪ World’s Richest Man (Forbes 35th Annual List) : Jeff Bezos.
▪ How much money does Amazon make?
Accounting can give you the answer!
US$21B net income in 2020!!!

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 15
External Users:
▪ Shareholders and potential investors - dividends, “purchase low, sell high”
▪ Creditors - whether to lend money or not
▪ Suppliers - pay money in time, maintain demand
▪ Customers - deliver products in time, maintain supply, maintain price
▪ Competitors – to understand your “enemy”
▪ Regulators – oversee the “players” and fairness in the market
▪ Taxing Authorities - collect appropriate level of taxes
Internal Users:
▪ Managers and employees - plan operations, to be well paid, to get promoted
Why do different parties care about a company’s financial statements?
Users of Accounting Information

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 16
▪ Financial accounting system
- Reporting of economic information to external users
- Periodic financial statements and related disclosures
- e.g. Investors, creditors, suppliers, customers
▪ Managerial accounting system
- Reporting of economic information to internal users.
- Detailed plans and continuous performance reports
- e.g. internal decision makers such as managers
▪ Tax accounting - Reporting of information to tax authorities.
This course will focus on Financial Accounting!
The primary objective of external financial reporting is to provide useful economic
information about a business to help external parties, primarily investors and creditors,
make sound financial decisions.
The Accounting System
3 Types of Accounting

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 17
Types of Business Entities
Sole Proprietorship Partnership Corporation
Single Owner Owned by two or more
partners
Owned by many holders
through shares
(shareholders)
Unlimited liability Unlimited liability shared
by partners Limited liability
▪ A corporation/company is a separate legal entity (i.e. separate from its owners).
Shareholders are NOT personally liable for the corporation’s acts.
Investors Business
Resources
Ownership

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 18
Financial Accounting Standards
International Accounting Standards Board (IASB) issues International
Financial Reporting Standards (IFRS)
▪ In Singapore, companies incorporated here must follow the Singapore
Financial Reporting Standards (FRS)
▪ Singapore FRS is based on the IFRS
▪ Singapore FRS are set by the Accounting Standards Council (ASC)
▪ Note: some old IFRS were issued as International Accounting Standards
(IAS), so the term IFRS and IAS can be used interchangeably.
Who determines the content of financial statements?

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 19
Standard Setters
U.S.ASingapore
U.S. Securities and
Exchange Commission (SEC)
Since 1934
Generally Accepted Accounting
Principles (GAAP)
Accounting Standards Council
Singapore
Since 2007
[2002-2007: Council on Corporate
Disclosure and Governance (CCDG)]
Singapore Financial Reporting
Standards (FRS) / International
Financial Reporting Standards (IFRS)
International
International Accounting
Standards Board (IASB)
Since 2001
International Financial
Reporting Standards (IFRS)

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 20
IFRS around the World
Global convergence to IFRS in response to global demand for comparability of
accounting reports.
Countries in blue
have adopted
IFRS
https://www.ifrs.org/use-around-the-world/use-of-ifrs-standards-by-jurisdiction/
Note:
US. GAAP and IFRS are
pursuing a convergence
process →aimed to
achieve a single set of
accounting standards for
global use

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 21
IASB Conceptual Framework
Conceptual Framework for Financial Reporting (revised 2018)
▪ Starting point for the development of IFRS standards
▪ Deals with the objective of financial reporting – providing useful
information
▪ Defines basic accounting concepts
▪ Gives guidelines for good accounting : Qualitative Characteristics
▪ Qualitative characteristics define the types of information that are likely
to be most useful to users

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 22
Qualitative Characteristics
(1) Relevance
▪ Gives numbers that users need for decisions
▪ Predictive – future outcomes
▪ Confirmatory – confirm past evaluations
(2) Faithful Representation
▪ Provides true, fair and neutral view
▪ Neutrality is supported by prudence, which is the exercise of caution
when making judgements under uncertainty
Fundamental Qualitative Characteristics

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 23
Qualitative Characteristics
(1) Comparability
▪ Can compare company X to company Y; or company X this year to
company X last year
(2) Verifiability
▪ Can check if the numbers are correct
(3) Timeliness
▪ Information is not stale of out of date
(4) Understandability
▪ Users can understand the information
Enhancing Qualitative Characteristics

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 24
Ethical Conduct
▪ Ethics – beliefs that distinguish right from wrong: good vs bad behavior
▪ For accounting to be useful, it must be TRUSTED by its users. Accountants are
perceived as being responsible for making sure misrepresentation does not occur.
Remember: Good ethics are good business!
➔ Ethics is crucial to accounting!
▪ Accounting scandals driven by greed and poor ethics:
▪ Luckin Coffee 2020 – Chinese coffee chain inflated sales by more than RMB
2billion in 2019 through fake coupons.
▪ Hin Leong 2020 – Singapore oil trading company overstated assets by US$3
billion and fabricated documents to conceal US$800m losses
▪ Satyam 2009 - Indian IT services firm inflated revenue by $1.5 billion, by
falsifying revenues, margins, and cash balances.
▪ Accounting scandal is a constant pandemic: Enron 2001, WorldCom 2002,
AIG 2005, Lehman Brothers 2008, Bernie-Madoff 2008, Wells Fargo Bank
2016

What is an external audit?
▪ Financial reports and underlying transactions incorporated into financial statements are examined to
ensure compliance with accounting standards.
▪ Financial statements are the responsibility of a company’s management.
What is an Auditor?
▪ An auditor is an independent certified public accountant (CPA) who performs an external audit on a
company’s financial statements, and issues an audit report that contains an auditing opinion on whether
the financial statements comply with prevailing accounting standards.
Why audit financial statements?
▪ While an audit report does not guarantee accuracy, it however provides the public with additional
assurance, beyond the management’s own assertions, that a company’s financial statements are not
misleading, and can therefore be relied upon.
ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 25
Auditors & External Audit
The “Big Four”

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 26
Accounting & Technology
While technology has allowed companies to:
▪ Automate routine bookkeeping functions
▪ Easily gather vast amounts of information about individual transactions.
▪ Compile large amounts of data quickly and accurately
▪ Acquire and help analyze financial information in a more effective and
efficient manner.
However, technology has NOT replaced judgement!
Accounting
SystemJudgement needed to input
useful information
Judgement needed to analyze
information for sound decision making

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 27
What is Lily worth?
ASSETS LIABILITIES
Property $2,000,000 Debt $2,000,000
▪ Lily has $2m in property. She has $2m in debt. How much is Lily worth?
▪ Net worth = Assets – Liabilities ($2M - $2M)
➔ Lily’s net worth is ZERO!
If Lily earns $150,000 in cash this year, what would her net
worth be now?
➔ Assets $2.15M – Liabilities $2M = net worth $150k

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 28
The Fundamental Accounting Equation
▪ Luca Pacioli, a Renaissance era monk, developed a method for tracking the success or
failure of trading ventures.
▪ A transaction affects (1) the goods, and (2) the claim of it.
ASSETS = LIABILITIES + EQUITY
Assets = Claim of assets
Assets = Liabilities + Equity
Luca Pacioli,
Father of Modern Accounting
Claims by
creditors
Residual value
to owners
The Accounting Equation ALWAYS balances!

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 29
IASB Conceptual Framework Defines
ASSETS
▪ A resource controlled by the entity in the present
▪ Due to past event
▪ That will give rise to future benefits

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 30
IASB Conceptual Framework Defines
LIABILITIES
▪ A present obligation
▪ Arising from past event
▪ That is expected to lead to a future outflow of resources upon settlement
▪ Creditor’s claim on assets.

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 31
IASB Conceptual Framework Defines
EQUITY
▪ Owner’s claim on the residual interest in the assets after deducting all liabilities,
representing the net assets (total assets – total liabilities) of the company.
▪ Claims arising from:
(1) Capital Stock / Share Capital (original equity invested by owners)
(2) Retained earnings (equity earned by the company – accumulated earnings of the
business not distributed to owners)
▪ Revenues – earned from company’s operations
▪ Expenses – cost incurred in earning revenues
▪ Dividends – portion of profits distributed back to shareholders
Profits = Revenues – Expenses

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 32
IASB Conceptual Framework Defines
EXPENSE
▪ Outflow/depletions of assets OR incurrence of liability resulting in decrease in
equity
▪ During the accounting period other than distributions to owners
CAPITAL MAINTENANCE ADJUSTMENTS
▪ Revaluation or restatement of assets/liabilities resulting in changes in equity
▪ Not included in the income statement
▪ Treated as Other Comprehensive Income (OCI)
INCOME (Revenue, Gains)
▪ Inflow/enhancement of assets OR decrease in liabilities resulting in
increase in equity
▪ During the accounting period other than contributions from owners

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 33
Stand Up & Stretch!
Let’s take a 5 minutes break

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 34
▪ FRS 1 states that a complete set of financial statements comprise of:
▪ Financial statements summarize the financial activities of a business.
FRS (IAS) 1 Presentation of Financial Statements
The Four major statements (also known as)
(1) SFP: Statement of Financial Position (BS: Balance Sheet)
(2) SCI: Statement of Comprehensive Income
▪ SPL: Statement of Profit & Loss (IS: Income Statement)
(3) SCE: Statement of Changes in Equity
(4) SCF: Statement of Cash Flows

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 35
(1) Statement of Financial Position
SFP shows assets, liabilities and equity at a particular point in time
The general format of a Classified Statement of Financial Position is:
(1) Assets
▪Current Assets : to be used, or turned into cash, within a year
▪e.g. cash, receivables, short term assets, inventory, office supplies, prepaid expenses
▪Noncurrent Assets : to be used for more than a year
▪e.g. long-term investment, fixed assets, intangible assets (such as goodwill)
(2) Liabilities
▪ Current Liabilities : to be resolved within a year
▪ e.g accounts payable, salaries payable, current portion of debt, unearned revenue
▪ Noncurrent Liabilities
▪ e.g. long term notes payable (long-term debt), bonds payable, mortgages payable
(3) Equity
▪ Capital Stock / Share Capital
▪ Retained Earnings

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 36
(1) Statement of Financial Position Example
Think of the balance sheet as a
camera snapshot of a company’s
economic resources and
obligations at a point in time.
High
Low
liquidity
High
Low
liquidity
Go-go-green Company
Statement of Financial Position
At December 31, 2021 and 2020
2021 2020
Assets
Current Assets:
Cash 100,000 80,000
Receivables 50,000 40,000
Inventory of merchandise 30,000 10,000
Total Current Assets 180,000 130,000
Non-current Assets:
Property, Plant & Equipment 100,000 100,000
Less: Accumulated Depreciation (30,000) (20,000)
Total Non-current Assets 70,000 80,000
Total Assets 250,000 210,000
Liabilities
Current Liabilities:
Accounts Payable 25,000 15,000
Unearned Revenue 20,000 0
Tax payable 5,000 3,000
Total Current Liabilities 50,000 18,000
Non-current Liabilities:
Long term Debt 10,000 10,000
Total Liabilities 60,000 28,000
Equity
Share Capital 150,000 150,000
Retained Earnings 39,000 31,000
Other Reserves 1,000 1,000
Total Equity 190,000 182,000
Total Liabilities & Equity 250,000 210,000

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 37
Limitations of the SFP
▪ Assets recorded at cost, not market value. Usually, book value < market value.
▪ Book value = value of equity recorded on the books
▪ Market value = market price per share x number of shares (known as “Market Capitalization”)
▪ Not all economic assets are reflected in the SFP (e.g. company’s reputation, in-house brand)
Rank Company (Country)
Market Cap (US$bn)
@ Mar 31 2021
Book Value (US$bn)
@ 2020 fiscal YE
1 Apple (U.S.A) 2,051 65
2 Saudi Aramco (Saudi Arabia) 1,920 293
3 Microsoft (U.S.A) 1,778 118
4 Amazon (U.S.A) 1,558 93
5 Alphabet (U.S.A) <Google> 1,393 223
6 Facebook (U.S.A) 839 128
7 Tencent (China) 753 120
8 Tesla (U.S.A) 641 23
9 Alibaba (U.S.A) 615 166
10 Berkshire Hathaway (U.S.A) 588 451
World's Top 10 Companies by Market Capitalization (vs. Book Value)

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 38
(2) Statement of Comprehensive Income (SCI)
Shows the firm’s economic performance over a period of time. (e.g. month/yr)
▪ Net Income (NI) = Revenues – Expenses
▪ Net income increases equity (retained earnings), while net
loss decreases equity (retained earnings).
▪ Other Comprehensive Income (OCI)
▪ Revaluation or restatement of assets/liabilities resulting in
changes in equity.
▪ OCI is an equity, NOT revenue or expense.
→ Comprehensive Income = NI + OCI
Revenues $ X
Less: Expenses (X)
Net income (NI) X
Other Comprehensive income (OCI) X
Comprehensive income $ X
IAS 1 allows companies to present Comprehensive Income on either a single statement OR
two separate statements:
1) Income Statement (IS) – also known as the Statement of Profit & Loss (SPL)
2) Statement of Comprehensive Income

Go-go-green Company
Statement of Comprehensive Income
For the Years Ended December 31, 2021 and 2020
2021 2020
Sales Revenue 50,000 65,000
Cost of Goods Sold (15,000) (20,000)
Gross Profit 35,000 45,000
Operating Expense (24,000) (30,000)
Operating Income 11,000 15,000
Non-operating Expense (800) (500)
Interest Expense (2,000) (1,300)
Gain/(loss) 500 0
Profit Before Tax 8,700 13,200
Income Tax Expense (700) (1,100)
Net Income 8,000 12,100
Other Comprehensive Income 0 800
Comprehensive Income 8,000 12,900
ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 39
SCI Examples
Two statements (IS + SCI) vs. One statement (SCI)
NI is often
referred to as the
“bottom line”
Go-go-green Company
Statement of Comprehensive Income
For the Years Ended December 31, 2021 and 2020
2021 2020
Net Income 8,000 12,100
Other Comprehensive Income 0 800
Comprehensive Income 8,000 12,900
Two separate statements:
Think of the SCI as a movie, a video
camera capturing the economic activities
of the company over a period of time.
Go-go-green Company
Income Statement
For the Years Ended December 31, 2021 and 2020
2021 2020
Sales Revenue 50,000 65,000
Cost of Goods Sold (15,000) (20,000)
Gross Profit 35,000 45,000
Operating Expense (24,000) (30,000)
Operating Income 11,000 15,000
Non-operating Expense (800) (500)
Interest Expense (2,000) (1,300)
Gain/(loss) 500 0
Profit Before Tax 8,700 13,200
Income Tax Expense (700) (1,100)
Net Income 8,000 12,100
One single statement:

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 40
Classifying the Income Statement
Revenues vs. Gain/Losses
▪ Revenue refers to income earned in the normal operation of the business - appears at the
very top of the income statement.
▪ E.g. Dyson sells vacuums, income from selling the vacuums is called sales revenue.
Salons provide services, income from providing the service is called service revenue.
▪ Gain/Loss refers to money made or lost on activities outside the normal business of a
company – appears at the bottom of the income statement after operating income.
▪ E.g. Dyson makes money from selling an office building, this amount is called a gain. A salon
had to dispose an equipment early due to a workplace accident, this amount is called a loss.
Operating vs. Non-Operating Categories
▪ Expenses are divided into operating and non-operating:
▪ Operating expenses – expenses incurred in the normal operation of the business
(e.g. salaries expense, rent expense, admin expense, depreciation expense etc…)
▪ Non-operating revenues/expenses - NO connection with the specific nature of the
operation of the business. (e.g. interest revenue, interest expense, tax expense, etc…)

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 41
(3) Statement of Changes in Equity (SCE)
Shows how equity changes over a reporting period
▪ Recall:
▪ Equity is made up of:
1) Share Capital – amount invested in the company by the owners
2) Retained Earnings (RE) - amount of a business’s earnings that have been
accumulated & retained in the business.
▪ The earnings that have not been retained are distributed to owners in the form of a dividend.
▪ Ending RE = Beginning RE + Net Income – Dividends
3) Other Equity (e.g. Reserves - used to track OCI items)

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 42
SCE Example
Beginning Equity
+ Net increase/(decrease)
in share capital
+ Net income
- Dividends
+ OCI
= Ending Equity
Go-go-green Company
Statement of Changes in Equity
For the Year Ended December 31, 2021
Share Retained Other Total
Capital Earnings Reserves Equity
Beginning Balance $ 150,000 $ 31,000 $ 1,000 $ 182,000
Net Income 8,000 8,000
OCI 0 0
Dividends 0 0
Ending Balance $ 150,000 $ 39,000 $ 1,000 $ 190,000

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 43
(4) Statement of Cash Flows (SCF)
Shows a company’s cash inflow and outflows over a period of time.
Three Elements of Statement of Cash Flow
(1) Cash Flows from Operating Activities (CFO)
▪ Cash flows directly related to the company’s main
business operations that generates revenue
▪ E.g. receiving payment from customers, paying
suppliers, paying salaries, paying taxes
(2) Cash Flows from Investing Activities (CFI)
▪ Cash flows related to acquisition or sale of company’s
productive assets
▪ E.g. buying/selling equipment, land and building
(3) Cash Flows from Financing Activities (CFF)
▪ Cash flows related to financing of the company
▪ E.g. receiving money from investors and creditors,
paying loans, paying dividends
Changes in cash = CFO + CFI + CFF
Go-go-green Company
Statement of Cash Flows
For the Year Ended December 31, 2021
Cash flows from operating activities
Cash generated from operations $ 25,000
Net cash from operating activities $ 25,000
Cash flows from investing activities
Purchase of equipment $ (5,000)
Net cash from investing activities $ (5,000)
Cash flows from financing activities
Issuance of shares $ -
Payment of Dividends $ -
Net cash from financing activities $ -
Net increase in cash $ 20,000
Cash balance, January 1, 2021 $ 80,000
Cash balance, December 31, 2021 $ 100,000

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 44
Notes to Financial Statements
▪ Notes to Financial statements provide supplemental information about
the financial conditions and economic performance of a company.
▪ Considered an integral part of the financial statements
▪ Four categories of notes:
Summary of Significant Accounting Policies
Additional Information about the Summary Totals
Disclosure of Information Not Recognized
Supplementary Information (required by the IASB)

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 45
Real Financial Statement
ComfortDelGro
▪ Let’s take a look at a real company’s financial statements:
ComfortDelGro 2020 Financial Statements
from Annual Report
(available for download from LumiNUS)
Also available for download directly from ComfortDelGro’s website: https://www.comfortdelgro.com/annual-reports

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 46
Understanding the Financial Statements:
Relationships Among the 4 FS
▪ How do each financial statements relate to each other?
Income Statement
NET INCOME
Statement of Changes in Equity
Beg Equity + share capital changes
+ Net Income – Dividends
+ OCI = Ending Equity
Statement of Financial Position
Assets (Cash)
Liabilities
Shareholders’ Equity (ending
equity, including RE)
Statement of Cash Flow
(SCF)
Reports changes in cash
→ CASH (End balance)
NI is a component to
determine ending RE Ending RE = Beg RE +
Net Income - Dividends
• Ending Cash is reported on
the SFP’s Assets.
• SCF provides greater
details on how cash
changes

Fundamental Concepts & Assumptions
of Accounting
▪ Separate entity concept : Activity of a business entity is separate from its individual owners.
▪ Time-period assumption : A business entity’s activities can be divided into specific time periods
(e.g. monthly, quarterly, annually)
▪ Assumption of arm’s-length transactions : Business dealings between independent and rational
parties who are looking out for their own interests (i.e. no bias)
▪ Cost principle : Transactions are recorded at historical costs, which is the original amount
paid/received, representing the fair market value at the time of transaction.
▪ Fair value principle : Some assets and liabilities are measured at fair value so that relevance of
accounting information is improved (IFRS allows fair value approach for valuation of certain
assets/liabilities)
▪ Monetary measurement concept : Only economic activities measurable in monetary terms (i.e.
money) are recorded in the accounting system
▪ Going concern assumption : Assume that a business entity will continue to exist in the
foreseeable future
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ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 48
Take Away for Lecture 01
(Chapter 1 & 2)
▪ Accounting is the language of business:
▪ Used by external & internal users for decision making
▪ Financial accounting - provides useful economic information about a business to
help external parties make financial decisions.
▪ Accounting is guided by ethics, principles and standards:
▪ IASB ➔ IFRS – Singapore uses Singapore FRS based on IFRS
▪ Qualitative characteristics of accounting: relevance, faithful representation,
comparability, verifiability, timeliness & understandability.
▪ Fundamental Accounting Equation: (remember, the equation must always balance!)
Assets = Liabilities + Stockholders’ Equity
▪ Four major Financial Statements: SFP, SCI, SCE & SCF

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 49
The Four Major Financial Statements
Fundamental Equations Summary
(1) Statement of Financial Position (Balance Sheet)
▪ Think of a snapshot of the company at a specific date
Assets = Liabilities + Shareholders’ Equity
(2) Statement of Comprehensive Income (Income Statement + SCI)
▪ Think of a movie of the company for a period of time
Revenues – Expenses = Net Income
Net Income + OCI = Comprehensive Income
(3) Statement of Changes in Equity
Beg Equity + Net Increase/(decrease) in Capital +
Net Income – Dividends + OCI = End Equity
(4) Statement of Cash Flows
Changes in Cash = CFO + CFI + CFF

What to expect for next lecture?
ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 50
Chapter 03:
▪ The double-entry system: the backbone of accounting!
DEBIT / CREDIT
▪ How to analyze and record transactions
▪ Journal entries (General Journal)
▪ T-accounts (General Ledger)
▪ Preparing trial balance
▪ Financial Statement Analysis (FSA) – Financial Ratios
▪ Return on Assets (ROA)
▪ Debt Ratio

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 51
Final words before we end the lecture
Don’t forget to:
▪ Review the chapter & lecture slides
▪ Practice the self-study questions
▪ LumiNUS discussion forum: let’s create a lively community!
▪ Post questions (& answers) on the forum
▪ Share and learn together
▪ Most times, your classmates is one of your most valuable resource, help each other
out.
▪ Feel free to post accounting-related issues to discuss
▪ Don’t let your questions accumulate! Stay on top of the materials.
▪ For office hours, email me at [e-mail]

ACC 1701 (AY2122S1) LECTURE 01 (Dr. Hanny Kusnadi) 52
That’s All Folks for Today!
A bit tired?
Feeling overwhelmed?
Don’t worry.
It will get better so hang in there!
SEE YOU NEXT WEEK! STAY SAFE!