Lessonnotes

Lesson1:IntroductiontoAccounting

LearningObjectives

1.Understandtheconceptsofeconomicmanandnatureoffirm

fromtheperspectiveofeconomicman.

2.Appreciatethetrustissueandtheuniqueroleofaccountingin

trustbuildingandmaintaining.

3.ComprehendtheconceptofEconomicDarwinismandits

implicationandtheselectionoftrustingmechanism.

4.Understandtheoriginanddevelopmentofaccountingdiscipline.

TeachingHours

Studentsmajorinaccounting3hours

Otherstudents3hours

Teachingcontents

Thislessoncompriseofthreemajorissues,thatis,thenatureofthe

firm(preliminaryissue),valueofaccounting(coreissue),andoriginsand

evolutionofaccounting(coreissue).Itfollowsthelogicarrayinthe

sectionsbelow:

First,aquestionisraised:weretheresuchpositionsasaccountants

attheMountainLiang?Whydidaccountingexisteveninthe

brotherhoodoftheMountainLiang,wherefriendshipandloyalty

despisedthematerialrichness?Thereliesaproblemofhumannature,

onwhichwebaseourdiscussionofthenatureofthefirm,introducing

thetrustissuesrelatingtotheefficiencyofthefirm'soperations.Then

withthethoughtsofEconomicDarwinism,weexplorethevalueof

accounting,whichisprovedalower-costdeviceoftrust.

Nowthataccountingisinterwovenwithhumantrust,thediscussion

ontheoriginsandevolutionofaccountingbecomesaneasiertask.The

instructormayusethebackgroundknowledgeofhistory,anthropology

oreventhenoveltyinMingandQingdynasties,illustratetheconnection

betweentheprogressofaccountingandthatoftechnologyand

economy.

Inthecourseofthislesson,weadopttheconceptofREMM,

however,theinstructorneedpayextraattentiontoleadingthestudents

toacorrectunderstandingoftheEconomicManview,thusformulatinga

rationalandwiseviewoflifeinajointeffortofcivilethicaleducation,

thereforeintegratingthepersonalvaluewithsocialvalues,personalfate

andsocialdestinations.Forinstance,thenatureofanEconomicMan

demandsthemaximizationofpersonalinterests,thusrealizingthis

maximizationbyrespectingtheinterestsofotherpeopleandthesociety.

Nomaximizationofpersonalinterestscanbeachievedwithoutthe

premisethattheinterestsofothersandthesocietyarefirstsatisfied,

whichisillustratedinanoldsaying,"T。givegoesfirstthantotake”.This

viewisalsoappliedinthein-classdiscussions.

NatureoftheFirm

NatureofHumanBeingsTheopeningquestioniswhythe

societyneedsaccounting?IntheviewofEconomicDarwinism,if

accountingcancreatevaluetothesociety,thesocietywillneedno

accounting.Whatisthevalueofaccounting?

Toconvertanabstractissueintoaconcreteone,weaskthis

question,instead,inanalternativeway,thatis,weretheresuch

positionsasaccountantsattheMountainLiang,andwhyaccountingwas

neededthere?Whilelecturing,theinstructorcanadjustthese

questionsaccordingtohis/herownreading,forinstance,whowasthe

accountantintheJia'sFamilyandwhydidtheyneedthisrole(adopted

fromthereadingoftheDreamsintheRedMansions)?Ofcourse,some

discussioninthislessonmightserveasapreludetothelaterlectureson

theinternalcontrols,forexample,whydidaccountingfailitsfunctions

bothattheMountainLiangandattheRedMansions?

Alongwiththediscussiononwhytherewereaccountingpositions

attheMountainLiang,wezeroinonthenatureofhumanbeings,

coveringthetopicssuchasthevirtualorviciousoriginofhumanlife,the

MaslowPyramid,theEconomicMenofAdamSmith.Thisdiscussion

reliesontheinstructor'sscopeofknowledgeandinterests.Sincethis

lessonisbasedontheeconomicassumptionofEconomicMen,the

conceptiscrucial.SomeChinesetraditionalthoughtsmightbe

mentionedtothestudents,suchastheConfucius”內圣夕卜王"，those

prevalentsocialcustoms,bureaucraticinstitutionsandethicalideas

illustratedinthenoveltyofMingandQingdynasties.

ThenatureofthefirmAccountingexistsinallorganizations

representedbytheenterprise,therefore,accountingeducationis

orientedwithbusinessaccounting.Wedemonstratetheformsof

enterprisesasastartingpoint.

Thissectionreviewsforawhilethefirmtheories,anditdirectsthe

attentionofthestudentsfromtheknowledgeaboutthefirmto

knowledgeaboutthemembersinthefirm,bymeansofcasediscussion

(suchasEnronandAnderson.Forfurtherreference,pleasereadLiu

Feng,2003,NatureoftheFirm:adeconstructiontheoreticalanalysis

basedonthefailureofAnderson,GuangdongFinanceandAccounting,

vol.3),

ValueofAccounting

Sinceafirmconsistsofhumanbeings,whoareingeneraleconomic

men,theydefinitelydemandamechanismoftrust.Otherwise,thefirm

cannotsurvive,letalonegrow.Inthecourseofhumanprogress,new

waysandmechanismsfortrusthavebeencontinuouslyexplored.For

instance,theearlyhumansocietywascontrolbymankindor

organizations.Infact,underthefeudalistemperorship,bloodtieswasone

ofthemostimportantmeansoftrust.Thefeudalistdefendingsystemalso

servedasadeviceoftrust.Ofcourse,thesemeansarenotonlyexpensive,

butalsounsuitabletothehumanneeds.Thustheyhavebeengradually

abandoned.

Fromtheperspectiveoffirm'soperationsandeconomicfunctions,

manywayshavebeeninventedandtestedinthehumanhistory.For

instance,mankindwasusedforcontrolintheancienttradingbusinessin

Jingdynasty.(晉商票號).Mortgagedcontractsprevailedin1980's.

However,thesesystemsarelimitedbythegeographiclocations(e.g.

controllingbymankind),orbyscales(e.g.large-scalefirmdemandingan

extremelylargeamountofmortgage),thereforereducingtheirgenerality.

Comparedwiththese,accountingcanexpressthefirm/soperating

activitiesinmonetaryterms,whichfacilitatesthesummarizationand

comparison.Thusithasbeenwidelyacceptedasarelativelyefficient

way.Ofcourse,wecanproveitsefficiencyinotherwayssuchasthe

EconomicDarwinism.TheessenceoftheDarwinismcanbeexpressedas

“survivorsarethefittest”,orputitinotherwords,whatcansurviveis

relativelyefficient.Nowadays,almostallorganizations,profitablesuchas

firmsornon-profitablesuchashospitalsandschools,employ

accountants,whichprovesaccountingtobeanefficientmechanism.

Infact,asanoldChineseproverbsays,“eventherealbrothers

shouldhaveaclear-cutbookkeeping/Itisevidentthatagood

bookkeepingisbetterwaytomaintaintrust.

Hereistheuniquevalueofaccounting:alower-costandwidely

acceptedmechanismoftrust.

OriginsandEvolutionofAccounting

Thissectionisdesignatedtopresentarelativelyintegrated

accountingviewtothestudentsbymeansofdescribingtheoriginsand

evolutionofaccounting.

Asaccountingisalower-costdeviceoftrust,itcanbetracedbackto

theearlystageofhumancivilization.Itcaneasilyfiguredoutthat,in

earlytimes,duetothelowproductivity,mankindhadtoselectthemost

necessarythingsforsakeofsurvival,andwrittencivilizationcouldnot

derivefromthemotivationofleisureandentertainments.Theearliest

writtenrecordofhumancivilization,suchasrecordingwithstringties

andcurvingthewoods,areallhighlyrelatedtoaccounting.''Phoenician

createdalphabetsfortheonlypurposeofaccounting771；”Theearliest

documentsintheworldareaccountingrecordsanddictionary,whichis

notoccasionalevent.TheymadetheSumeranecessity."2.Thissection

isrichinreferences,whichcanbeselectedinthediscretionofthe

instructor.

A.C.Littleton,awell-knownaccountingexpert,publishedin1933

booktitledastheEvolutionofAccountingBeforethe20thCentury.He

pointsoutthatthedoubleentrysystemwasinventedbasedonseven

premises:theArtofWriting,bookkeepingisfirstameansofrecording；

theArithmetic,themethodologyofbookkeepingiscomposedof

continuoussimplecalculations；thePrivateProperty,bookkeepingonly

concernstherecordsofthefactsrelatingtopropertiesandrightsto

them；theMoney,orthemoneyeconomy,onlywhenbookkeeping

convertsallpropertiesandtheirexchangesintoauniformmonetaryunit,

ittakestheformofexistence；theCredit,e.g.unsettledexchange,ifall

exchangesaresettledonsite,thereisnoneedforrecordingthem；the

Commerce,thelocalexchangealonecannotchannelbusinesspeople

mindsintoanintegratedsystem；thecapital,withoutit,businessis

alwaysasmallscale,nocreditsincurred(p.12).Italyexactlymetallthese

1出自Woolf,A.II.,Ashorthistoryofaccountantsandaccountancy,London,1912。本文轉引自

索科洛夫(前蘇聯)著、陳亞民等翻譯《會計發展史》，中國商業出版社，1990年。

2出自柴爾德，《遠古文化史》，轉引自文碩，《西方會計史》，中國商業出版社，1987年，第4頁。

conditionsthen.

ThedoubleentrysystemwasoriginatedinItaly,withtheCross

Crusadeandtheadvanceoffinancingindustry.Itissuggestedthatthe

booktheEraofMarcoPolo,theCrossCrusade,andtheMongolian

Empire(contemporarywithGuoJing,theherooftheStoriesofHeroes

DefeatingEagles(ShediaoYingxiongZhuan)belinkedtogether,toensure

abetterunderstanding.

Theevolutionofaccountingiscloselylinkedtotheprospectsofthe

societyandeconomy.FollowingItaly,theNetherlandsbecamethe

strongesteconomicpowerintheworld.Theautomaticbalance

mechanismofthedoubleentrysystemwasgreatlyimproved.Thenthe

GreatBritain,withitsindustrialrevolutionandmodernplants,firstsaw

theappearanceofcostaccounting.Later,withtheboomofcapital

marketintheUnitedStates,thetraditionalbookkeepingevolvedinto

financialaccounting.Meanwhile,auditingbecameaseparatediscipline.

Thebirthofmanagementaccountingwasbredbytheeconomicgrowth

inthe1950'softhe20thCentury.IntheU.S.,duetocomplicatedcapital

marketanddiversifiedfinancingresources,financialmanagementstood

outasanimportantsubject.Themediaalsoreportsthat,beforethe

CrisesofSoutheastAsia,thesalariesandpositionsofCFOinHongKong

werenotremarkableatall,however,eversincethen,theyhavebeen

significantlypromoted.Itcanserveasevidencethataccountingis

determinedbytheeconomiccircumstances.

Sofar,wehavedepictedaframeworkofaccounting.

Ofcourse,theimpactsoftechnologicaldevelopmentonaccounting

shouldbementionedaswell.Forinstances,thewideuseofcomputers

enhancestheaccountingprocessingcapacity,reducesthecostand

satisfiesmorediversifiedneedsofinformation;theinternetrealizesthe

real-timetransmissionofinformation,whichwillleadtoarevolutionary

influenceonaccounting.

Additionally,thissectionisalsorelatedtothenewtrendsinsuch

disciplinesastheaccountingforchangingpricesandmultinational

enterpriseaccounting.

PedagogicalNotes

Thisisagreatconcernofmostbeginners.Ourexperiencestellusto

offerarelaxingenvironmenttothelearners.Forthisreason,thefirst

lessonrarelymentionsspecialaccountingterms.Theyareencouraged

toreadmore,especiallywithaviewrelatedtotheirspecialty.For

instance,readthosesociologicalworksornovelsoftheMingandQing

dynastieswithvariedperspectivesoftrust,controlandaccounting.

Beginnersmightwonderwhataccountantsshoulddoinfuture.We

quotesomeexamplesfromtheStoriesofHeroesDefeatingEagles

(ShediaoYingxiongZhuan),toillustratethecloseconnectionbetween

thejobresponsibilitiesandthejobber'scapacity.Thestudentis

supposedtounderstandthatincollegetime,theextensivescopeof

knowledgeandabilitywillbeofgreatimportancetothefuturecareer

development.

NotesonCaseDiscussion

Thecaseisintendedfortwopurposes:first,thestudentshalllearn

howtoconsultrelatedmaterialsandthisabilityisverycrucialtofuture

independentstudies.Hintscanbeprovidedtothestudent,astotheway

ofutilizingtheonlineresources.Second,studentsarerequiredtojudge

thecourtverdictsfromthevalueofaccounting,thusencouragedtolearn

aboutlaws,includingtheconventionalandcommonlaws,aswellasthe

judiciaryprocedures.

Keypoints

1.Fromeconomicmantoacoalitionofinterestofeconomicman.

2.Therelationbetweentrustandhumannatureandits

implicationtocorevalueofaccounting.

3.Therelationbetweeneconomicdevelopmentandaccounting

development.

Readingmaterial

1、Chancellor,Edward,DevilTakeTheHindmost,Ahistoryof

financialspeculation,FirstPlumePrinting,2000.

2、Jensen,MichaelC.andMeckling,WilliamH.,"TheNature

ofMan".MichaelC.Jensen,FOUNDATIONSOF

ORGANIZATIONALSTRATEGY,HarvardUniversityPress,1998,

andJournalofAppliedCorporateFinance,1994

http:〃ssrn.com/abstract=5471

3、Littleton,A.C.,AccountingEvolutionto1900,AmericanInstitute

Publishing

Co.,New.York,NY1933.

4、Shiller,Robert,IrrationalExuberance,BroadwayBooks,NY,

2001.

Lessonnotes

Lesson2:EconomicTransactionsandAccounting

Equation

Learningobjectives

Thislessonbeginswithadiscussionofthepurposeofabusiness,

includingadiscussionofformsoforganizations.Next,thenatureof

businessoperationsisdiscussed.Thefourtypesofbusinessesare

discussed:service,merchandising,manufacturing,andfinancialservices.

Italsoconcludeswithadiscussionofthegeneralformsofbusiness

ownership:soleproprietorships,partnerships,andcorporations.

Thenthelessoncarriesonwithadiscussionofbusinessactivities

andtheevents,resources,andelementsaffectingbusinesstransactions.

Thefocusofaccountingequation(thatis,A=L+OE)isexplainedin

detail.TheBeautyPhotoStore,alocalcasewecreate,ispresentedto

illustrateourpointsinthislesson

Teachinghours

Studentsmajorinaccounting:3hours

Others:3hours

Teachingcontents:

OpeningStory

Thislessonstartswithanopeningcaseofsomewhatconnectionto

thereallifeofstudents,thatis,thefundingandspendingatcollege.

Suggesteditemsrelatingtotheaccountingtopicsare:Assetsofacollege

student,forexample,cash,CDplayer,computer,andthewaysoffunding

theseassets:sponsoredbyparents,sponsoredbyrelatives,borrowed

fromrelativesandacquaintance.

Wecoulddealwiththeabove-mentionedfinancialissuesfromthe

followingperspectives：Howdowefundourdailyexpendituresand

possessions?Howdowespendthe“funds“whichwehavesourced?

Whatabouttherelationshipbetweenthe“funds“whichwehave

sourcedandourdailyexpendituresandpossessions?

Enterprises

Studentsareaskedtosuggestexamplesofeachtypeofbusiness:

service,merchandiser,manufacturer,andfinancialservices.Pointout

thatmanybusinessesarecombinationsofoneormoretype.

Studentsaregoingtounderstand:ConceptofEnterprise,Definition

of"enterprise",Functionsofanenterprise,Characteristicsofan

enterprise.

Therearethreemajorformsofenterprise:Sole-proprietorship,

Partnership,Corporations.Andtherearefourtypesofenterprise:

Serviceorganizationprovidesservices(doessomethingforyou)rather

thansellingsomething;merchandisingbusinessbuysgoods,addsvalue

tothem,thensellsthemtocustomers;manufacturer-makesthe

productsitsells;financialservicescompanydoesnotmaketangible

productsanddoesnotsellproductsmadebyothercompanies;dealsin

servicesrelatedtomoney

ResourcesinanEnterprise

Majorresourcesinanenterprise:

1.Humanresources:properties,plantandequipment,supplies,raw

materials,finishedproductsorinventories

2.Financing(financialresources):Forinstancethoseincashorbank

deposits

3.Resourcesinmaterialforms

MovementsofMaterialResourcesinanEnterprise

(Anexample-BeautyPhotoStore)

MovementsofMaterialResourcesinanEnterprise

1)Movementsinamanufacturingenterprise

cash/bankdeposit玲rawmaterials->work-in-process->finished

products今fin玲cash/bankdeposit

2)Movementsinamerchandisingenterprise

cash/bankdeposit玲inventory玲cash/bankdeposit

ActivitiesofEnterprise

Threemajorphasesofbusinessactivities:

1)Inception

2)Operating

3)Liquidation

InceptionofEnterprise

1)Inceptionandinvestmentoffunds

*Externalfunding

*State,legalpersons,privatesorforeigninvestors；

*Financingfrombankinginstitutions,otherlegalpersonsor

privates

*Owners'equityandliabilities

2)FormsofInvestment

*Monetary(cash/bankdeposits)

*Property,plantsandequipment

*Rawmaterialsandgoods,etc.

3)Sourcesandchangesoffunds

*Increaseofowners/equityorliabilities

*Increaseofassets

OperatingActivities

Operatingactivitiesandchangesofasset

*ChangesofassetsinBeautyPhotoStore

*ConnectionsbetweenBeautyPhotoStoreandSuppliers,clients,

etc.

LiquidationofEnterprise

1)Liquidationofenterpriseandpayoffoffunds

*Paymentoftaxes

*Distributionofprofits

*Declarationofdividends

*Payoffofborrowings

2)Withdrawalsandchangesoffunds

*Decreaseofassets

*Decreaseofliabilitiesorowners7equity

AccountingTransactions

Firstofall,wedefineabusinesstransactionasaneventthataffects

thefinancialpositionofabusinessandmaybereliablyrecorded.Further,

wewillexploretherelationshipbetweentheEconomicActivitiesand

AccountingElements.Accountingelementsincludeassets,liabilities,

owner'sequity,revenues,expensesandprofit(loss).

Weshouldalsoknowabouttheconnectionbetweentheusesof

fundsandassets:thetermsofcash,equipmentandothersare

mentioned;andtheconnectionbetweentheresourcesoffundsand

equity:forinstance,borrowingsandequityofcreditors—liabilities,

investmentsandowner/sequity.Usesandchangesoffundsarestudied

heretoo.

BeautyPhotoStorecaseisreviewedhere,fromcashtoequipment;

usingequipmenttoproducephotos;fromphotostocash.

Circulationoffunds:Usesoffundsandassets,andpayoffoffunds

fortheBeautyPhotoStore:Costofequipment,costofsupplies,human

costs?(WhataretheoperatingpurposesforBeautyPhotoStore?)Cash

receptionsandrevenuesbyBeautyPhotoStore,netincreaseoffunds

andprofit,differencebetweenusesandpayoffofcash?(Natureof

profit?)

AccountingTransactions

Accountingtransactions-Economicexchangebetweentwodifferent

accountingentities:Mutualexchange:Apurchasesanasset,payingcash

orbearingtheresponsibilityofpayingcashinfuture;Bsellstheasset,

earningtherightsofreceivingorcollectingcash;One-waytransaction:

Investmentsordonationstoanotheraccountingentity

AccountingEvents:Accountingevents-internaltransferringof

resourcesamongdepartmentsofasameentity;allotmentsofraw

materialsforplants;Damagescausedbyearthquakes.Externalversus

internalevents:Betweendifferententitiesorwithinasameentity

AccountingCircumstances:Accountingcircumstances-usuallyan

outcomeofcollaborationofmultipleevents.Circumstancesandtheir

impacts:Changesinprices,exchangerates;Howtodeterminethese

changes?E.g.uncollectabilityofreceivablesduetotheliquidationofthe

debtor;Unpredictability

ElaborationonAccountingElements

Assets-Liabilities-Owner/sequity-Revenues-Expenses-Profits

Assets:Assetsareeconomicresourcesownedbyabusinessthatare

expectedtobeofbenefitinthefuture.FurtherThoughtsonAssets:

Humanresourcesasanasset?forexample,valueandlaborofManager

ofBeautyPhotoStore?Cameramenandshopassistants?Natural

resourcesasanasset?

Liabilities:Liabilitiesarecreditor!"sclaimstotheassets.Liabilities

areobligationstooutsiders

Owner/sEquity:Owner'sEquityistheowner/sclaimtotheassets.

Itistheamountofassetsthatremainsaftersubtractingtheliabilities.

ChangesinOwner/sEquity;Investmentsbyownersandrevenues,

amountsearnedbydeliveringgoodsorservicestocustomers,increase

owner/sequity.Withdrawalsofassetsfromthebusinessbyownersand

expensesdecreaseowner'sequity.Expensesoccurwhenassetsareused

orliabilitiesincreaseasaresultofearningrevenues.

Revenue:Revenues(sales)areincreasesinowners'equityarising

fromincreasesinassetsreceivedinexchangeforthedeliveryofgoodsor

servicestocustomers.Revenuesareincreasesineconomicresources,

eitherthroughincreasestoassetsorreductionstoliabilities

RevenueRecognition:Revenueshouldberecognizedinthefinancial

statementwhen:1)theperformancehasbeenachieved;2)thereis

reasonableassuranceregardingthemeasurementandcollectabilityof

theconsideration

Expense:Expensesaredecreasesinowners'equitythatarise

becausegoodsorservicesaredeliveredtocustomers.Expensesare

decreasesineconomicresources,eitherthroughoutflowsorthe

using-upofassetsorincurrenceofliabilitiesfromdeliveringorproducing

goods,renderingservices,orcarryingoutotheractivitiesthatconstitute

theentity'snormalbusiness.

ExpenseRecognition:Cost,expenditure,andexpense;general

recognitioncriteria.ApproachestoexpenserecognitionareCost,

Expenditure,andExpense.Whenweagreetopayoutcash(orother

assets)forgoodsorservicesreceived,wehaveincurredacost.Whenwe

actuallypaythecash,wehaveexpenditure.Whenthebenefitsofthe

costhavebeenusedandweputthatcost(oraportionthereof)onthe

incomestatement,wehaverecognizedanexpense

GeneralRecognitionCriteria

Recognizeditemsmustmeetthedefinitionofafinancialstatement

elementandhaveavalidmeasurementbasisandamount.Financial

statementelementsarebasedonfutureeconomicbenefitsorsacrifices;

thesemustbeprobableforrecognitiontobeappropriate.

Expensesaredecreasesineconomicresources,eitherbywayof

outflowsorreductionsofassetsorincurrencesofliabilities,resulting

fromanentity!-sordinaryrevenuegeneratingorservicedelivery

activities.

Assetorexpense?iftheassetrecognitioncriteriaaremet,an

assetisrecorded.Ifnot,anexpenseisrecorded

ApproachestoExpenseRecognition

Definitionalapproach:expensesarecreatedeitherthroughthe

reductionofanassetortheincreaseinaliability

Matchingapproach:oncerevenuesaredeterminedinconformity

withtherevenueprincipleforanyreportingperiod,theexpenses

incurredingeneratingtherevenueshouldberecognizedinthatperiod

Profit/Loss

Income(profitorearnings)istheexcessofrevenuesoverexpenses

AccountingEquation

Assets+Liabilities=OwnersEquity

NetAssets=Owner/sEquity

Everyaccountingtransactionhasanequalaffectonbothsidesof

theequation.

Purchasea$20,000carforcash.

Increaseassetcaranddecreaseassetcashby$20,000.Nonet

changetoassets.

Purchasea$20,000caroncredit.

Increaseassetcarandincreaseliabilitiesby$20,000.

DualAspectofAccountingEquation

Assets=Liabilities+Owner/sequity.

LHS=RHS.

Firstview:

Resources=Obligationstocreditorsorclaimsonresources+

Residualclaim.

Secondview:

Amountsinvestedinresources=howtheseamountswerefinanced.

Resources=financedbycreditors+financedbyowners.

AnIllustration:BeautyPhotoStore

ChangestotheaccountingequationofBeautyPhotoStore(seethe

powerpoints)

CaseforDiscussion

MarksandSpencer

In1882,aRussianrefugeenamedMichaelMarkscametotheNorth

EastofEngland.Needingwork,heputatrayroundhisneckandstarted

sellinghaberdasheryinthevillagesaroundLeeds.Twoyearslaterhe

borrowed￡5fromhisfriendIsaacDewhirsttobuystock,andwasable

toopenastallinLeedsmarket.

WithintenyearsMarks/ssuccessasatraderhadenabledhimto

establishachainofstallsinmarketsthroughoutNorthEastEngland.In

1894,Marksrealizedthathisbusinesswasgettingtoolargeforhimto

manageeffectivelyonhisown.Hedecidedtoformapartnershipwith

TomSpencer-andMarks&Spencerwasborn.

Thebusinesscontinuedtothriveandgrow,soin1903Marksand

Spencerregisteredtheirpartnershipasaprivatelimitedcompany.This

allowedmorepeopletobecomeinvolvedwithmanagingthegrowing

companyandincreaseitsfinancesbybuyingsharesinthecompany.One

shareholderwasIsraelSieff,whobecamechairmanofthecompanyin

1917.SieffcanbecreditedwithshapingthefutureofMarks&Spencer.

By1926,Marks&Spencerhadopened125stores.Inordertocontinue

itssuccessfuldevelopmentthecompanyfinallyregisteredasapublic

limitedcompany(plc)inordertoobtainasmuchcapitalaspossibleto

financeitscontinuedgrowth.

Andtherest,astheysay,ishistory.

SuggestedQuestions

1)Howmanypeoplestartedtheoriginalbusinessthateventually

becameMarks&Spencer?

2)Whoownedtheoriginalbusiness?

3)WhoownsMarks&Spencerplc?

4)WhydoyouthinkMarks&Spencerbecameapubliclimited

company?

5)Doyouthinkthebusinesswouldhavedevelopedinthewayithas

ifitwasstillownedbyoneperson?

Lessonnotes

Lesson3:AnalyzingandRecordingAccountingTransactions

Learningobjectives

1.Providethestudentswithabackgroundoftheaccountingprocess

tobetterunderstandthenumbersonthefinancialstatements

2.Definetheeconomictransactionsandeventsthatareincluded

intoouraccountingconsiderations

3.Learnaboutthefundamentalaccountingsystemandits

components

4.Understandthebasicaccountingequationandillustrateitwith

someexamplesoftransactionsandtheirimpactsonthe

accountingEquation.

Teachinghours

Studentsmajorinaccounting:3hours

Others:3hours

Teachingcontents:

Whatshouldwetakeintoourconsiderationwhenwedealwiththe

businessactivitiesasaccountants?

Theexchangesofeconomicconsiderationbetweentwopartiesshallbe

clearlydefined:

Transactions-externa