accounting planning, recording, analyzing, and interpreting financial information
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What is Accounting?. Accounting Planning, recording, analyzing, and interpreting financial information Accounting System A planned process for providing financial information that will be useful to management. What is Accounting?. Accounting Records - PowerPoint PPT PresentationTRANSCRIPT
• AccountingAccounting– Planning, recording, analyzing, and Planning, recording, analyzing, and
interpreting financial informationinterpreting financial information
• Accounting SystemAccounting System– A planned process for providing financial A planned process for providing financial
information that will be useful to information that will be useful to managementmanagement
What is Accounting?What is Accounting?
• AccountingAccounting RecordsRecordsOrganized summaries of a business’s Organized summaries of a business’s financial activitiesfinancial activities
• Financial StatementsFinancial Statements–Financial Reports that summarize the Financial Reports that summarize the financial condition and operations of a financial condition and operations of a businessbusiness
What is Accounting?What is Accounting?
• Service BusinessService Business– Performs an activity for a feePerforms an activity for a fee
• Ex: McDonald’s cooks your food for youEx: McDonald’s cooks your food for you
• Proprietorship (Sole Proprietorship)Proprietorship (Sole Proprietorship)– A business owned by one personA business owned by one person
THE BUSINESS – TECHKNOW CONSULTINGTHE BUSINESS – TECHKNOW CONSULTING
Forming and Dissolving a Proprietorship
Critical ThinkingCritical Thinking1.1. Why do you think more businesses are Why do you think more businesses are
organized as proprietorships than any organized as proprietorships than any other form of business organization?other form of business organization?
2.2. What kinds of people do you think What kinds of people do you think would be most successful as owners of would be most successful as owners of a proprietorship?a proprietorship?
BUSINESS STRUCTURESBUSINESS STRUCTURES( )( )
• AssetAsset– Anything of value owned by a businessAnything of value owned by a business
• EquitiesEquities– Financial rights to the assets of the Financial rights to the assets of the
businessbusiness
• LiabilityLiability– Any amount owed by a businessAny amount owed by a business
Assets = Liabilities + Owner’s EquityLeft side amount Right side amount
$0 $0 + $0=
The Accounting EquationThe Accounting Equation
• Owner’s EquityOwner’s Equity– The amount remaining after the value of all The amount remaining after the value of all
liabilities is subtracted from the value of all liabilities is subtracted from the value of all assetsassets
• Accounting EquationAccounting Equation– Equation showing the relationship among Equation showing the relationship among
assets, liabilities and owner’s equityassets, liabilities and owner’s equity
Accounting Scandals Rock the Financial World
• EthicsEthics– The principles of right and wrong that The principles of right and wrong that
guide an individual in making decisionsguide an individual in making decisions
• Business EthicsBusiness Ethics– The use of ethics in making The use of ethics in making
business decisionsbusiness decisions
CHARACTER COUNTSCHARACTER COUNTS( )( )
Completing The Accounting EquationCompleting The Accounting Equation
Assets = Liabilities + Owner’s Equity
______ = 3,000 + 8,00011,000
End of LessonEnd of Lesson REVIEWREVIEW
10,000 = _______ + 6,000
63,000 = 35,000 + ______
4,000
28,000
WORK TOGETHER 1-1WORK TOGETHER 1-1
Receiving CashReceiving Cash
AssetsAssets == LiabilitiesLiabilities ++ Owner’s EquityOwner’s Equity
Cash Kim Park, Capital=
$0 $0 $0
+ $ 5,000 + $ 5,000
$ 5,000 $ 5,000$0
• TransactionTransaction– Business activity that changes assets, Business activity that changes assets,
liabilities, or owner’s equityliabilities, or owner’s equity
• AccountAccount– Record summarizing all information pertaining Record summarizing all information pertaining
to a single item in the accounting equationto a single item in the accounting equation
• Account TitleAccount Title– The name given to an accountThe name given to an account
• Account BalanceAccount Balance– The amount/value in an accountThe amount/value in an account
• CapitalCapital– Account used to summarize the owner’s equityAccount used to summarize the owner’s equity
AssetsAssets == LiabilitiesLiabilities ++ Owner’s Owner’s EquityEquity
=
$0
$0
- 275$0$ 5,000 $ 5,000
$0
Cash Kim Park, Capital+ Supplies Prepaid Insurance
+
$0 + 275
$ 4,725 $ 275 $0 $ 5,000 - 1,200 + 1,200
$ 3,525 $ 275 $1,200 $ 5,000
Paying CashPaying Cash
AssetsAssets == LiabilitiesLiabilities ++ Owner’s Owner’s EquityEquity
Cash Kim Park, Capital=+ Supplies Prepaid Insurance
+
$0 $3,525 $ 275 $1,200 $ 5,000
Accts. Pay. Supply Depot
+
+ 500 + 500
$3,525 $ 775 $1,200 $ 500 $ 5,000 - 300 - 300
$ 200 $3,225 $ 775 $1,200 $ 5,000
Transactions on AccountTransactions on Account
End of LessonEnd of Lesson REVIEWREVIEW
WORK TOGETHER 1-2WORK TOGETHER 1-2
Determining how transactions change an accounting equationDetermining how transactions change an accounting equation
Assets = Liabilities + Owner’s EquityTrans.No.
1.
2.
3.
4.
+ +
+ +
+ -- -
AssetsAssets == LiabilitiesLiabilities ++ Owner’s EquityOwner’s Equity
Cash Kim Park, Capital=
$ 775 + 295
$ 200$3,225 $ 5,000
+ Supplies Prepaid Insurance
+
+ 295
$3,520 $0 $ 5,295 + 350
$3,520 $ 350 $1,200 $ 5,645
+
A/R OakdaleSchool
A/P SupplyDepot
+
$0(revenue)(revenue)
$ 775
$ 775
$1,200
$1,200
$ 200
$ 200
+ 350 (revenue)(revenue)
Total of left side:Total of left side: Total of right side:Total of right side:
$3,520 $350 $1,200$775+ + + = $5,845 $5,845$200 $5,645+ =
REVENUE TRANSACTIONSREVENUE TRANSACTIONS
• RevenueRevenue– Increase in owner’s equity resulting from Increase in owner’s equity resulting from
the operation of the businessthe operation of the business
• Sale on AccountSale on Account– Sale for which cash will be received at a Sale for which cash will be received at a
later datelater date
• ExpenseExpense– Decrease in owner’s equity resulting from Decrease in owner’s equity resulting from
the operation of a businessthe operation of a business
• WithdrawalsWithdrawals– Assets taken out of a business for the Assets taken out of a business for the
owner’s personal useowner’s personal use
EXPENSE TRANSACTIONSEXPENSE TRANSACTIONS
AssetsAssets == LiabilitiesLiabilities ++ Owner’s EquityOwner’s Equity
Cash =
$ 775 - 300
$ 200$3,520 $ 5,645
+ Supplies Prepaid Insurance
+
- 300 (expense)
$ 350 $ 5,345 - 40
$3,180 $350 $1,200 $ 5,305
+
A/R OakdaleSchool
A/P SupplyDepot
+
$ 350
$ 775
$ 775
$1,200
$1,200
$ 200
$ 200
- 40 (expense)
Total of left side:Total of left side: Total of right side:Total of right side:
$350 $1,200$ 775+ + + = $ 5,505 $ 5,505$ 200 $ 5,305+ =
Kim Park, Capital
$3,220
$3,180
AssetsAssets == LiabilitiesLiabilities ++ Owner’s EquityOwner’s Equity
Cash Kim Park, Capital=
$ 775 + 200
$ 200$3,180 $ 5,305
+ Supplies Prepaid Insurance
+
- 200
$3,380 $150 $ 5,305 - 125
$3,255 $150 $1,200 $ 5,180
+
A/R OakdaleSchool
A/P SupplyDepot
+
$350
$ 775
$ 775
$1,200
$1,200
$ 200
$ 200
- 125 (withdrawal)(withdrawal)
Total of left side:Total of left side: Total of right side:Total of right side:
$3,255 $150 $1,200$ 775+ + + = $5,380 $ 5,380$ 200 $ 5,180+ =
OTHER CASH TRANSACTIONSOTHER CASH TRANSACTIONS
End of LessonEnd of Lesson REVIEWREVIEW
WORK TOGETHER 1-3WORK TOGETHER 1-3
Determining how transactions change an accounting equationDetermining how transactions change an accounting equation
Assets = Liabilities + Owner’s EquityTrans.No.
1.
2.
3.
4.
+ +
+ +
- -+ -
5. - -
CashAccts. Rec –Bowman Co.
Supplies PrepaidInsurance
Accts. Pay-Maxwell Co.
Susan Sanders, Capital
+ + + = +
• Standards and rules accountants Standards and rules accountants follow while recording and reporting follow while recording and reporting financial activities. financial activities. Written by FASBWritten by FASB
• Why is it necessary?Why is it necessary?• Users of financial statements rely on the Users of financial statements rely on the
information those statements contain. information those statements contain. • Consistent methods allow users to be confident of Consistent methods allow users to be confident of
the information’s validity.the information’s validity.
EXPLORE ACCOUNTINGEXPLORE ACCOUNTING(( ))