UpdatesTest

266 views

Published on

Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
266
On SlideShare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
3
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

UpdatesTest

  1. 1. CHAPTER ONE STARTING A PROPRIETORSHIP: CHANGES THAT AFFECT THE ACCOUNTING EQUATIONCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
  2. 2. LESSON 1-1 The Accounting EquationCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
  3. 3. 3 WHAT IS ACCOUNTING?  Accounting  Planning, recording, analyzing, and interpreting financial information  Accounting system  Planned process for providing financial information that will be useful to management  Accounting Records  Organized summaries of a business’s financial activities  Financial Statements  Financial reports that summarize the financial condition and operations of a businessCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  4. 4. 4 WHAT IS ACCOUNTING?  Service business  Business that performs an activity for a fee  Proprietorship  Business owned by one person  AKA “sole proprietorship”  Accounting Concept: Business Entity  Applied when a business’s financial information is recorded and reported separately from the owner’s personal financial informationCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  5. 5. 5 PROPRIETORSHIP  Advantages  Ease of formation  Total control by the owner  Profits that are not shared  Disadvantages  Limited resources  Unlimited liability  Limited expertise  Limited life  Legal obligationsCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  6. 6. 6 THE ACCOUNTING EQUATION  Asset  Anything of value  Includes:  Cash  Supplies  Prepaid Insurance  Used to acquire other assets or to operate a businessCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  7. 7. 7 THE ACCOUNTING EQUATION  Equities  Financial rights to the assets of a business  2 types  Equity of those to whom money is owed  Liability- amount owed by a business  Equity of the owner  Owner’s Equity- Amount remaining after the value of all liabilities are subtracted from the value of all assetsCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  8. 8. 8 THE ACCOUNTING EQUATION page 8  Equation showing the relationship among assets, liabilities, and owner’s equity  Must be in balanceCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  9. 9. 9 CHARACTER COUNTS  Ethics  Principles of right and wrong that guide an individual in making decisions  Business Ethics  Use of ethics in making business decisionsCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  10. 10. LESSON 1-2 How Business Activities Change the Accounting EquationCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
  11. 11. 11 RECEIVING CASH  Account  Record summarizing all the information pertaining to a single item in the accounting equation  Account title  Name given to an account  Account balance  Amount in an accountCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  12. 12. 12 RECEIVING CASH  Capital  Account used to summarize the owner’s equity in a business  Capital Account = Owner’s Equity AccountCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  13. 13. 13 RECEIVING CASH  Transaction  Business activity that changes assets, liabilities, or owner’s equity  Accounting Concept: Unit of Measurement  Applied when business transactions are stated in numbers that have common values (dollars, Euros, etc.)CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  14. 14. 14 RECEIVING CASH page 10 Transaction 1 August 1. Received cash from owner as an investment, $5,000.00.CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  15. 15. 15 PAYING CASH  A transaction does not always require than an amount be recorded on both sides of the equation  Paying CASH for SUPPLIES  Both are AssetsCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  16. 16. 16 PAYING CASH page 11 Transaction 2 August 3. Paid cash for supplies, $275.00. Transaction 3 August 4. Paid cash for insurance, $1,200.00.CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  17. 17. 17 TRANSACTIONS ON ACCOUNT  Buying something now, Paying later  Accounts Payable  Liability account  Right side of the equation  Paying a bill for past purchases  Still use the Accounts Payable accountCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  18. 18. 18 TRANSACTIONS ON ACCOUNT page 12 Transaction 4 August 7. Bought supplies on account from Supply Depot, $500.00. Transaction 5 August 11. Paid cash on account to Supply Depot, $300.00.CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  19. 19. LESSON 1-3 How Transactions Change Owner’s Equity in an Accounting EquationCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
  20. 20. 20 REVENUE TRANSACTIONS  Revenue  Increase in owner’s equity resulting from the operation of a business  Money received from providing goods or services  Sale on account  Sale for which cash will be received at a later date  Accounts Receivable  Asset account  Left side of equation  Accounting Concept: Realization of Revenue  Applied when revenue is recorded at the time goods or services are soldCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  21. 21. 21 REVENUE TRANSACTIONS page 14 Transaction 6 August 12. Received cash from sales, $295.00. Transaction 7 August 12. Sold services on account to Oakdale School, $350.00.CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  22. 22. 22 EXPENSE TRANSACTIONS  Expense  Transaction to pay for goods or services needed to operate a business results in a decrease in owner’s equityCENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  23. 23. 23 EXPENSE TRANSACTIONS page 15 Transaction 8 August 12. Paid cash for rent, $300.00. Transaction 9 August 12. Paid cash for telephone bill, $40.00.CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  24. 24. 24 OTHER CASH TRANSACTIONS  When cash is received on account, the capital account is not affected  REMEMBER- the sale was recorded previously  Withdrawals  Assets taken out of a business for the owner’s personal use  Decreases the owner’s equity  Can withdraw any asset  Cash, supplies, etc…CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1
  25. 25. 25 OTHER CASH TRANSACTIONS page 16 Transaction 10 August 18. Received cash on account from Oakdale School, $200.00. Transaction 11 August 18. Paid cash to owner for personal use, $125.00.CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-3

×