of Accounting 01. Now, everybody should have had a previous session where we talked about

class policies. For you face to facers we did that last time we didn't film that, and

for you people at home I did a separate filming and taping of going through the class policies

for you, so please make sure those folks at home are taking this as an online class that

you watch that don't just skip it thinking it's not going to be important. It's very

important to succeed in this class I want you to know how we're going to do things so,

for the people watching at home on You-Tube or on DVDs, or on that cable TV channel never

skip the lectures ok, watch them in sequence watch the whole thing. If you try to shortcut

it you'll do yourself harm so, at this point everybody knows the class policies and procedures

and everything we're going to go ahead, and start the subject of accounting now, I always

like to say at the very beginning some people have to take this class, and it's like "oh

I wish I didn't have to take this, but I have to it's required" some people want to take

it. Truth be told out of the fifteen of you here there's maybe only one or two who want

to be a full-time accountant someday so sometimes the question comes up "why do we have to take

accounting", and I'll tell you. Several reasons, but one of them is statistically speaking

about half of you are going to own, or co-own a business sometime in your life. Now it may

not be your sole source of making money, but it may be just an ancillary income, but you

will own or co-own a business. Now I've talked to some of you, and a lot of my students they

want to be entrepreneurs, they want to own a business someday. Well if you do that you

need to know accounting at least at some level, and you might say "well I'll just hire somebody

to do my accounting", but what's the problem with that? Anybody know? It costs money, and

what's the other one? you might get ripped off. You can look at the business section,

and see what happens when a business owner gives all of their accounting responsibilities

to somebody else. It's like "will we trust that person?" I could tell you horror story

after horror story from my days as a Financial statement Auditor of small businesses that

somebody ripped them off, because that person didn't know accounting at all. So, maybe you

won't do all the book keeping, but you at least at some level need to know accounting.

Accounting is the language of business, plus, wherever you all end up working there's going

to be a bottom line. There's going to be a net income that you need to meet, right, I

mean JCCC isn't out for profit, but we concentrate on that bottom line too. We have to stay afloat

don't we? In your own homes you have financial situations right? So, the language of business

is accounting, it's very important to know, so I know there are a lot of reasons for being

in this class, but I want you to remember that there's basic concepts of business, and

how important it is to apply to accounting. The first thing I want to do is go over and

you should have the PowerPoint slides for you folks here in the face to face. I handed

these out to you, and for you folks at home, I have these on ANGEL under the lessons tab.

I thinks it's very beneficial to have these so, you don't have to copy everything down

that's on the screen, and you can just take notes to the side, or however you'd like to

do it. Let's go ahead and go through the very first slide for chapter one, and that is going

to be kind of the definition of accounting. I spend a lot of time on this slide so don't

think that every slide we do we'll spend this much time on, but I think this is a real nice

definition, and I'm not the type of teacher who's going to give you a test question that

says "write out the definition of accounting", because truth be told you can find another

text-book, and it probably would be slightly different, but this one has a lot of good

aspects, and I want to concentrate on that a little bit. It says accounting is a system

that identifies, records, and communicates information that is relevant, reliable, and

comparable to help users make better decisions. Let's go off the PowerPoint, and come back

and I want to step away from that for a second, and take you to a different example I think

will help flesh out that definition. Let me write something down here that has absolutely

nothing to do with accounting, and tell me if anybody knows what I'm doing? I'll give

you a clue it has to do with sports. I'm sure you're all like what is he doing? Right, any

idea what that is? Anybody want to make a guess? It has to do with basketball. Anybody

here play basketball? You've watched basketball right? You know what a free throw is right?

It's when a player gets fouled they go to the line, and they shoot free throws, right?

Well, one of the things I did in high school (I love basketball still do), but I couldn't

make the basketball team at my high school. So, what I did and this sounds like a geeky

future accounting professor thing to do - I kept stats for the basketball team. Traveled

around with them, and kept stats. So, let's go back to this do you see how this applies

to free-throws. What this meant is player twelve got fouled, and he went to the line

for two free-throws he missed the first one, so I didn't color in that bubble, and he made

the second so I colored that in, you with me? Okay then player seventeen got fouled

for two shots he made both of them so I colored in the bubbles. Number nine player got fouled,

and that looks a little different doesn't it? Anybody want to venture a guess what that

is? Not a technical - do you know what a one and one is? Certain types if you get fouled

you don't get two free-throws, but if you make the first one you get a second attempt.

Does that make sense? So I would draw that kind-of like a little cherry. So, this guy

got fouled and he made the first one, so he got a second attempt, right? If he wouldn't

have made the first one it would have just looked like that. This one has just one bubble,

what does that mean? Anybody want to guess? He made the shot, but he got a free-throw

so, if you get fouled while making a shot you make the basket, you get one free-throw.

Now, why do I show you this, because this has nothing to do with accounting? Well this

is one of the things as a basketball statistician that I kept track of for the coaches. Now,

the next day when I would come to school do you think the coach wanted me to hand him

this report, with the bubbles? Go back to the screen do you think that this is what

they wanted? What did they want? They wanted a condensed report, and I made out just a

sample report ok, this is kind-of what they wanted. This is a free-throw report for Northwest

vs. Southeast on October 20, 2011. This is the player Jones. This is the free-throws

attempted eight, and he made 4 free-throws, so he shot fifty percent. Smith went to the

line, and attempted ten free-throws only made eight, and shot eighty percent, do you see

what I'm saying? This was the report I gave the coach. Now, why would the coach care about

having this information? To know who the best free-throw shooters are may be there's a technical

during the game, and who would you want to put to the line, probably your best free-throw

shooter, right. You'd want to know who needs to work on free-throws, who's getting better,

who's getting worse, right. Do you agree if you were a basketball coach a report like

this would help you make better decisions, is that correct? Let's go back to the PowerPoint

definition, and let's apply this to the basketball example I just gave. That was a system that

identified, recorded, and communicated, wasn't it? For instance I would hear the whistle

blow, and it would identify that I need to record something, correct? It identified that

somebody was going to go to the line, and I needed to record it with that little bubble

method, and there's nothing magical about that little bubble method. I didn't make it

up as a common way to keep track of free-throws. Eventually I would need to communicate that

to my coach, right. Now, I would communicate it so it would help him make better decisions.

However, for it to be able to help him to make a better decision, it had to be relevant,

reliable, and comparable, what does that mean? Let's talk about that, what does it mean to

be relevant? To be relevant means it needs to be in regards, to the game that he's concerned

about, right? What if I were to give him the free-throw statistics for the 1972 Olympic

Games between Russia and U.S.A., is that relevant? Is that going to help him make a better decision?

No. So, it has to be relevant, it has to be related to what he's concerned about. It has

to be reliable. What if I don't know what I'm doing as a statistician - is it going

to help him make better decisions? No. What if I told him "hey coach, here's your report

for last night, but I'm going to be honest with you I was pretty drunk when I did it,

there's a lot of mistakes, I fell asleep during the third quarter... don't know how reliable

it is. Is it going to help him at all? No, and I did not drink as a high school student.

Note that if my mom is watching. The third one - it has to be comparable, what does that

mean? What that means is there has to be a consistent method that we are using to keep

track of this stuff, there has to be rules. For instance we always count a free-throw

made if it goes through the hoop, right? What if I said "I changed the rules I started to

count the free-throws even if it just hit the rim and even if it didn't go through,

well I changed the rules." Is that the way we've been doing it? No. Ok so it's no longer

comparable to previous games. Is it going to help him make a better decision? No. Go

back to that one more time this was a system that identified, recorded, and communicated,

and if it was relevant, reliable, and comparable it would help him make better decisions. Accounting

is the same way; now let's stay on this for a second. We identified things that needed

to be recorded these will be transactions that need to be recorded such as, buying office

supplies, or selling services to a customer, or paying our employees, or getting a loan

from the bank. We record that information, and eventually we're going to communicate

it through a report, through a summation like you were saying. And if that information is

relevant, and if it is reliable, and if it is comparable we're following the rules, it

will help our users make better decisions. What sort of decisions would you see in the

business world that would be aided by financial information presented to them in a report?

Do I want to invest in this company? Maybe, Do I want to extend credit, or make a loan

to this company? How's the business doing? Are we going to have enough cash to pay salaries

next month? Right, if you have a business you want to have accurate financial information,

financial reports - that's what accounting is about. Does that flesh that out a little

bit for you? Let's move on a little bit, I like to have our lectures be a mixture of

me talking, and then maybe taking a break and doing some exercises and then going over

those. I don't like it just to be me talking, but like I always have to say this first lecture

is a lot of me talking, because we really haven't done anything yet. So please don't

be concerned if you're going "gosh... are we just going to have to listen to this guy

every fifty minutes every time?" No, we'll be doing stuff that's why I want you to bring

your textbooks and your calculator to class. There will be a lot of times where we take

breaks, and you'll work on it for a while, but this lecture is kind of me jumping around

and giving a lot of basic business concepts, so we can start to build our foundation. Alright

let's go on, there are two sets of users of accounting information. There are external

users, and there are internal users. External users are those that do not work at the company.

They work outside of the company such as, lenders, or banks, or credit unions, or share

holders, or stock holders, or potential share holders and stock holders, the government,

consumer groups, customers, external auditors. Do you know what an audit is? An audit is

when you go in and you look at the records of a company, and you verify it. Sometimes

people think of an IRS audit. All of those individuals are external to the company, correct?

They don't work there, they're just they're outside the company. Now, external user's

financial accounting is the accounting that serves external users primarily, and that's

this class. Now, there are also internal users, these are the people that work at the company

such as, managers, or the sales staff, or the internal auditors. Some companies are

so big for instance; Sprint, they have their own internal audit department they're internal

within the company. There's also the controller, do you know what a controller is? The controller

is the chief accounting individual. He or she is in charge of all the accounting - they're

called the accounting controller, but all of those individuals are internal to the company.

Now, the type of accounting that is mainly concerned with internal users is managerial

accounting. Have you heard of managerial accounting? Does anybody already know they're going to

have to take managerial accounting? A lot of people will take financial accounting which

is mainly concerned of the external users, and then they eventually take managerial accounting

which is the internal users. Alright, let's go to the next slide just like there are rules

of basketball that must be followed there are rules of accounting that must be followed,

and this will help insure that the information remains relevant, reliable, and comparable,

and we know it has to be those three things for it to be useful. So, there are what's

called generally accepted accounting principles sometimes we abbreviate that GAAP (G double

A P) these are the rules that have been put into place that we have to follow for accounting.

We'll start learning some of those. Now, who sets those rules? Those are set by what is

called the Financial Accounting Standard Board, and we abbreviate that sometimes the FASB.

This is the private group that sets the rules of accounting. Now, they take input from a

lot of different groups such as the SEC the Security and Exchange Commission, have you

heard of that group? They're the government body that has the reporting rules for companies

that trade stock, and issue stock to the public they certainly have input to the FASB on what

GAAP is. There's also something called the International Accounting Standards Board,

and they deal with international standards ok, so they certainly have input to the FASB

as well. Now, one thing about international standards is that we're becoming a much smaller

world in some ways, aren't we? Have any of you going to these classes, have any of you

ever Skyped, do you know what Skyping is? Have you ever Skyped to somebody overseas?

Have you ever purchased something over the internet overseas? If I were to ask this in

an accounting class twenty years ago I probably would get responses like this - first of all

you would say: what is Skype, second thing you wouldn't think about buying something

from somebody in Germany for example, because it's just not possible. But with technology,

with communications we're becoming a smaller world aren't we? It's always interesting with

these accounting lectures being on YouTube I'll get emails from people in Poland, Saudi

Arabia, London, all over the world that somehow they stumble upon these lectures, and for