Riassunto esame Accounting, Prof. Tettamanzi Patrizia, libro consigliato Basic Accounting, how to prepare and analyze financial statements, Tettamanzi, Blandano, Goodman

ACCOUNTING

Lesson, 06/11/2025

Accounting: information system that identifies, records and communicates the economic

events (sales, cost of employees, raw materials…) of an organization to interested users for

decision-making.

Users of accounting information can be divided broadly into two groups:

Internal users:

who: for people who are working inside the company (managers, owners, accountants,

business analysts);

access to information: full access to all accounting information

goal: using data to make operational and strategic decisions

Salesforce: cloud-based software company. It provides CRM (Customer Relationship

Management): software and applications used by companies to manage sales, customer

service, marketing automation, ecommerce, and analytics.

This data help internal users manage customer data, work more efficiently and make better

business decisions.

Founded by Marc Benioff (1999), now is the 61st largest company in the world by market

cap. It has revolutionized the way companies manage customers, becoming huge in the

cloud software sector.

External users:

who: for people external to the company (customers, clients, investors…)

access to information: can access only the public financial statements

goal: using data to make decisions to buy or sell stocks, evaluating the risk of selling on

credit to a company.

Accounting is useful for:

internal users external users

marketing managers: investors:

determine the most to evaluate profitability and financial

cost-effective marketing strategies, set prices, health of the business

decide budgets

production supervisors: creditors:

monitor production evaluate ability of the business to

costs, decide budget for equipment and labor repay loans and interest

needs

finance directors: government regulatory agencies:

analyse financial to ensure

statements, allocate resources, set financial compliance with taxation laws and regulations

strategies

human resources managers: customers:

align decide on entering long-terms

compensation with the budget, evaluate the contracts or purchasing products

costs of training

company officers (CEO): suppliers: decide whether to offer credit or

finance terms

competitors

Types of accounting:

-​ Managerial accounting: focuses on internal processes inside the firm: how inputs

(buildings, cash, raw materials) are processed into outputs (goods or services).

provides internal reports and to help managers plan, control and make decisions.

-​ Financial accounting: focuses on external transactions of the firm: purchase and

sale of its products. provides information for external users (investors, creditors,

regulators)

Main forms of organizations:

-​ Sole proprietorship: business owned and operated by a single individual

-​ Partnership: business owned by two or more individuals who share profits and

expertise

-​ Corporation: legal entity separate from its owner, providing limited liability to its

shareholders.

FINANCIAL STATEMENTS

key product of financial accounting, documents that report financial information about a

business entity, telling us how well a business entity is performing in terms of profits and

losses and where it stands in financial terms. Useful to make decisions.

accounting entity: business or organization that is treated as a separate unit for accounting

purposes. Its financial records are kept separate from the personal finances of its owners or

other entities.

Types of financial statements:

-​ Balance Sheet / Statement of financial position

-​ Income Statement / Profit & Loss

-​ Statement of Cash Flows

IFRS (International Financial Reporting Standards) Standards:

set of accounting rules for the financial statements of public companies.

specify how companies must report their accounts, defining types of transactions and other

events with financial impact.

Financial statement must be:

-​ understandable

-​ readable

-​ comparable

-​ relevant to current financial transactions

These standards are adopted for use in 120 nations, including those in EU

IAS (International Accounting Standards): older version of IFRS

Balance sheet:

picture of the company’s financial position at the end of an accounting period.

Main elements:

-​ Assets: economic resources of a business that are expected to be of benefit in the

future

-​ Liabilities: economic obligations (debts) payable to outsiders (creditors)

-​ Owner’s equity: assets held by the owners who invested money in the firm (Assets -

Liabilities).

⤷ Common stocks: initial investment of the owners to start the activity

⤷ Earning: profits a company makes during a period, which can be distributed to

shareholders or retained in the business.

Structure:

Assets

Current Assets/short-term assets: assets that are used or converted into cash within the

course of a year.

⤷ Accounts receivable (money owed a company by its clients or customers who have

promised to pay the products at a later date).

⤷ Cash

⤷ inventory

TOTAL CURRENT ASSETS: sum of above accounts

Long-term/Fixed Assets: assets that represent a use of organizational funds of at least one

year.

⤷ investments: small ownership interest in other companies

⤷ gross property

⤷ less accumulated depreciation

TOTAL FIXED ASSETS: sum of above accounts

TOTAL ASSETS sum of asset values

Liabilities: debts that a firm owes to others

Current liabilities: a firm’s financial obligations to short term creditors, which must be repaid

within one year.

⤷ Accrued expenses: costs the company owes but has not paid yet.

⤷ Wages payable: money owed to employees for hours worked or salary.

⤷ Taxes payable: taxes owed based on earnings estimates for the quarter

⤷ Accounts payable: the amount a company owes to suppliers for goods and services

purchased with credit.

TOTAL CURRENT LIABILITIES: sum of above accounts

Long-term liabilities: all long-term that will not be paid in the next 12 months

⤷ long-term debt: loans of more than one year from banks, pension funds…

TOTAL LONG TERM LIABILITIES: sum of above accounts

TOTAL LIABILITIES: sum of all liability values

Accrued expenses: costs the company owes but has not paid yet.

Owners’ Equity: it includes all the owners’ investments in the organization plus the profits

the business keeps to grow and develop. (common stock + retained earnings)

⤷ retained earnings: profits the company keeps instead of paying to owners, used to grow

the business. (revenues - expenses - dividends)

⤷ common stock: amount invested in the company by the stockholders

TOTAL OWNER’S EQUITY: sum of above accounts

TOTAL LIABILITIES AND OWNER’S EQUITY = total assets

Accounting equation: Assets = Liabilities + Owner’s Equity

Income Statement:

financial report that shows an organization profitability over an accounting period.

Main elements:

-​ Revenues: increases in net earnings deriving from sales of goods or services to

customers or clients

-​ Expenses: decreases in net earnings, cost of doing business, that is the cost of all

the resources used to perform the business’ activity

-​ Net income / Net earnings: total profit or loss after all expenses have been deducted

from revenue (revenues-expenses)

Calculation of income statement

Revenue: money amount of product sold

- cost of goods sold: cost of production of products (machinery, workers, raw materials)

Gross profit: revenue - cost of goods sold

- selling and administrative expense: all other expenses of the activity

EBIT: earning/income before interest and taxes

- interest expense: cost a company has to pay when it borrows money

EBT: earning/income before taxes

- taxes

net income: total profit after expenses

- preferred dividends: payment to preferred stockholders

income to common stockholders

earning per share: income for each share of common stock

Statement of Cash Flows:

explain how the company’s cash is changed from the beginning to the end of the accounting

period

The change in cash is explained through details in three categories:

-​ Cash from operating activities: daily business activities (receiving cash from

customers, paying employees, paying suppliers, paying taxes or interest)

-​ Cash from investing activities: buying/selling long-terms assets (buying or selling

equipment, land or buildings, investing in other companies)

-​ Cash from financing activities: getting or paying back money from owners or

lenders (getting a bank loan, paying back a loan, issuing new shares, paying

dividends to shareholders)

The accounting period: period of time shown in the financial statements (usually reported

on the top). Usually this period corresponds to the calendar year (1/01 - 31/12)

Fiscal year: accounting year different from the calendar year

Basic accounting equation:

equation that expresses the relationship between assets, liabilities and owner’s equity.

ASSETS = LIABILITIES + OWNER’S EQUITY

it ensures that the balance sheet remains balanced.

it is a foundational concept that supports the entire structure of accounting

basis of the double entry accounting: each entry made on the debit side has a corresponding

entry on the credit side

main purposes of accounting equation:

-​ ensuring balanced financial statements

-​ providing a basis for double-entry accounting

-​ offering insights into financial health

-​ facilitating financial analysis

-​ helping in decision-making

-​ ensuring compliance with standards

-​ simplifying financial reporting

-​ supporting audit processes: steps auditors follow to check that a company’s financial

records are reliable

ACCOUNTING FOR BUSINESS TRANSACTIONS

1.​ Marco and his friends want to start their own business, called Marco & Co., in order

to buy and sell Italian books. To begin, they invest 100 Euros.

Assets = Liabilities + Paid-in Capital + Retained Earnings

+100 +100

2.​ Marco & Co. needs some space to perform its activity. It decides to buy a building

whose cost is 50, paid cash

Assets = Liabilities + Paid-in Capital + Retained Earnings

+50

-50

3.​ Marco & Co. decides to buy some furniture. It buys furniture for 30 agreeing to pay

the supplier within 30 days

Assets = Liabilities + Paid-in Capital + Retained Earnings

+30 +30

4.​ Marco & Co. buys 10 books for a total amount of 10, paid cash

Assets = Liabilities + Paid-in Capital + Retained Earnings

+10

-10

5.​ Marco & Co. sells half of the books (5 books) previously bought, earning 7, collected

cash

Assets = Liabilities + Paid-in Capital + Retained Earnings

+7 +7

-5 -5

6.​ Marco & Co. sells three more books, earning 5, agreeing to collect the amount within

10 days

Assets = Liabilities + Paid-in Capital + Retained Earnings

+5 +5

-3 -3

7.​ Marco & Co. pays part of its debt for 20

Assets = Liabilities + Paid-in Capital + Retained Earnings

-20 -20

Monitor your company’s financial health: a reliable accounting system will allow you to

properly assess the financial health of your company.

Lesson, 07/11/2025

Accounting information system

system of collecting and processing transaction data and communicating financial

information to decision makers.

most business use computerized accounting systems (EDP)

SAP

one of the biggest producers of software for the management of business processes,

creating tools that help companies process data efficiently and share information easily.

founded in 1972, now it is a multinational enterprise.

example of transaction codes:

Accounting transactions: economic events that require recording in the financial

statements. They have a dual effect on the accounting equation.

Not all activities are considered transactions. You should record an activity only if it affects

assets, liabilities, or stockholders’ equity.

T-ACCOUNT

one of the basic tools used by accountants to record transactions.

double-entry system: every transaction is recorded 2 times

debit side → on the left

credit side → on the right

Chart of accounts: list of all the accounts of the company (cash, supplies, land, ecc)

accounts commonly used by a company:

Ledger: book or digital record that shows all the transactions for each account in a company.

It keeps track of everything that goes in and out of each account.

Balance of an account

balance: amount remaining in an account (difference between the total debits and the total

credits)

⤷ left-side balance: total amount recorded in the left side is larger than the one on the right

⤷ right-side balance: total amount recorded in the right side is larger than the one on the left

⤷ normal balance: on the side where increased are recorded

Rules of the balance + -

ASSETS debit credit

LIABILITIES credit debit

OWNER’S EQUITY credit debit

EXPENSES debit credit

REVENUES credit debit

Structure of the T-account:

​

RECORDING PROCESS

1.​ Journalize transaction: record transaction into the journal (book containing a

chronological description of all transactions occurred)

complete entry in the journal:

-​ date of transaction

-​ accounts + (A), (L), (OE), (E), (R)

-​ amount to be debited or credited

-​ brief explanation of the transaction

2.​ Posting: procedure of transferring journal entry amounts into the ledger (book or

digital record that shows all the transactions for each account in a company), it

accumulates effects of the journalized transactions in the individual accounts.

operation normally performed by computers.

steps:

-​ account name and number

-​ specifying details of the journal entry

-​ entering debits and credits for the transaction

-​ calculating the running debit and credit balances

-​ correcting any errors

Example of recording process:

Debit and credit rules:

for every debit there must be a credit

Lesson, 13/11/2025

Recording owner’s contribution and financing operations

Corporation:

main characteristics:

-​ Separate legal existence: the corporation acts under its own name rather than in the

name of its stockholders

-​ Limited liability of stockholders: creditors ordinarily have recourse only to corporate

assets to satisfy their claims

-​ Transferable ownership rights: ownership of a corporation is held in shares of capital

stock, which are transferable units

-​ Ability to acquire capital: it is relatively easy for a corporation to obtain capital through

the issuance of stock

-​ Continuous life: life of a corporation is stated