1. Student Version o Repetition is an important component, a key part of learning. In memory, the more times patterns of thought are repeated, the more likely you will be able to recall information. o These PowerPoint slides have been modified from the lecture decks by making them fill-in-the-blank. Why? So that you get an opportunity to repeat a visual cue (from the lecture or the book) via completing text here. o In addition, most text book exhibits have been removed as they are available in your text directly.

2. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Introduction to Accounting and Business Chapter 1

3. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe the nature of a business, the role of accounting, and ethics in business. 1

4. Nature of Business and Accounting o A ______________ is an _____________ in which _____________ (_________), such as materials and labor, are ___________and ___________to provide ___________ or ___________ (_________) to customers.

5. Nature of Business and Accounting o The objective of most businesses is to _______a _________. o Profit is the _______ between the amounts _______ from customers for goods or services and the amounts _______ for the _______used to provide the goods or services.

6. The Role of Accounting in Business o ____________ can be defined as an __________ __________ that provides _______ to _______ about the _______ _______ and _______ of a _______.

7. The Role of Accounting in Business o The process by which accounting provides information to users is as follows:  ___________________________

8. _____________ Accounting o The area of accounting that provides internal users with information is called _______ _______ or _______ _______. o ____________ accountants employed by a business are employed in _______ accounting.

9. _____________ Accounting o The area of accounting that provides external users with information is called _______ _______. o The objective of financial accounting is to provide _______ and _______ information for the ____________________ needs of users _______ of the business. o ____________ _______ _______ are ______ one type of financial accounting report that is distributed to _______ users.

10. Role of Ethics in Accounting and Business o The objective of accounting is to provide relevant, timely information for user _______ _______. o Accountants must behave in an _______ manner so that the information they provide users will be _______ and, thus, _______ for decision making. o _______ are _______ principles that guide the _______ of individuals.

11. Opportunities for Accountants o Accountants and their staff who provide services on a _______ _______ are said to be employed in _______ accounting. o Accountants employed by a _______ _______, ______, or a ____________ _______ are said to be employed in _______ accounting. o Public accountants who have met a _______ __________, __________, and _____________ requirements may become _______ _______ _______ ( _______ ).

12. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Summarize the development of accounting principles and relate them to practice. 2

13. Generally Accepted Accounting Principles o Financial accountants follow _______ _______ _______ _______ (_______) in preparing reports. o Within the U.S., the _______ _______ _______ _______ (_______) has the _______ responsibility for _________ accounting principles.

14. Generally Accepted Accounting Principles o The _______ ___ _______ _______ (_______), an _______ of the U.S. government, has authority over the accounting and financial ___________ for companies whose _______ of _______ (_______) are _______ and sold to the _______. o Many countries _______ the United States use generally accepted accounting principles adopted by the _______ _______ _______ _______ (_______).

15. Business _______ Concept o Under the _______ _______ concept, the _______ of a business are recorded _______ from the activities of its _______, _______, or _______ _______.

16. ________________ A ______________ is owned by _______ individual.  70% of business entities in the U.S. are proprietorships.  They are easy and cheap to organize.  Resources are limited to those of the owner.  Used by small businesses.

17. ________________ A ______________ is similar to a ________________ except that it is owned by _________ or _________ individuals.  10% of business organizations in the U.S. (combined with limited liability companies) are partnerships.  Combines the skills and resources of more than one person.

18. _____________ A _________ is organized under _________ or _________ statutes as a separate ________ _________ entity.  Generates 90% of business revenues.  20% of the business organizations in the U.S.  Ownership is divided into shares, called stock.  Can obtain large amounts of resources by issuing stock.  Used by large businesses.

19. _________ _________ _________ (LLC) A _______ _______ _______ (_______) combines the attributes of a ___________ and a ___________.  10% of business organizations in the U.S. (combined with partnerships).  Often used as an alternative to a partnership.  Has tax and legal liability advantages for owners.

20. ________ Concept o Under the ________ concept, amounts are ________ recorded in the accounting records at their ________ or ________ ________.

21. Cost Concept o Aaron Publishers purchased a building on February 20, 2012, for $150,000. Other amounts related to this purchased are shown on the next slide.

22. Cost Concept   Price listed by seller on Jan. 1, 2012$160,000   Aaron Publishers’ initial offer to buy on Jan. 31, 2012140,000   Purchase price on Feb. 20, 2012150,000   Estimated selling price on Dec. 31, 2014220,000   Assessed value for property taxes, Dec. 31, 2014190,000 Recorded at: _____________________

23. ____________ Concept o The ________ concept requires that the amounts recorded in the accounting records be based on ________ evidence. o Only the ________ _____________ amount is ________ enough to be recorded in the accounting records.

24. Unit __ __________________ Concept o The ____ __ ________ concept requires that ________ ________ be recorded in ________.

25. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective State the accounting equation and define each element of the equation 3

26. The ______________ Equation o The _______ owned by a business are its _______. o The rights of _______ are the _______ of the business and are called _______. o The rights of the owners are called _______ _______. o The equation _______ = _______ + _______ _______ is called the _______ _______.

27. The _______ owned by a business _______ = _______ + _______ _______ T HE A CCOUNTING E QUATION

28. _______ = _______ + _______ _______ T HE A CCOUNTING E QUATION The rights of _______ are the _______ of the business

29. The _______ of the _______ _______ = _______ + _______ _______ T HE A CCOUNTING E QUATION

30. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe and illustrate how business transactions can be recorded in terms of the resulting change in the elements of the accounting equation 4

31. _______ Transaction o A _______ transaction is an _______ event or _______ that _______ changes an entity’s _______ condition or its results of _______.

32. On November 1, 2013, Chris Clark deposited $25,000 in a bank account in the name of NetSolutions. T RANSACTION A

33. On November 5, 2013, NetSolutions paid $20,000 for the purchase of land as a future building site. T RANSACTION B

34. On November 10, 2013, NetSolutions purchased supplies for $1,350 and agreed to pay the supplier in the near future. T RANSACTION C

35. Transaction C o The liability created by a _______ on _______ is called an _______ _______. o Items such as supplies that will be used in the business in the _______ are called _______ _______, which are _______.

36. T RANSACTION D On November 18, 2013, NetSolutions received cash of $7,500 for providing services to customers. A business earns money by selling goods or services to its customers. This amount is called _______.

37. Transaction D o _______ from providing services is recorded as _______ _______. o Revenue from the _______ of merchandise is recorded as _______. o Other examples of revenue include rent, which is recorded as _______ revenue, and _______, which is recorded as interest revenue. o An account _______ is a _______ against a _______, which is an _______.

38. T RANSACTION E During the month, NetSolutions spent cash or used up other assets in earning revenue. Assets used in this process of earning revenue are called _______.

39. On November 30, 2013, NetSolutions paid the following expenses: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275. T RANSACTION E

40. On November 30, 2013, NetSolutions paid creditors on account, $950. T RANSACTION F

41. On November 30, 2013, Chris Clark determined that the cost of supplies on hand at the end of the period was $550. T RANSACTION G

42. On November 30, 2013, Chris Clark withdrew $2,000 from NetSolutions for personal use. T RANSACTION H

43. S UMMARY

44. Types of Transactions Affecting _________ _________ Types of Transactions Affecting _________ _________

45. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe the financial statements of a proprietorship and explain how they interrelate. 5

46. ____________ Statements o After transactions have been _______ and _______, reports are prepared for users. The accounting _______ providing this information are called _______ _______.

47. F INANCIAL S TATEMENTS

48. _______ Statement o The _______ _______ reports the revenues and _______ for a _______ of time, based on the _______ concept. o The _______ concept is applied by “_______ ” the _______ incurred during a period with the _______ that those _______ generated. o The excess of the _______ over the _______ is called _______ income, _______ _______, or _______. If _______ exceed _______, the _______ is a _______ loss.

49. Statement of __________ __________ o The _______ ___ _______ _______ reports the changes in the _______ equity for a _______ of time. o It is prepared _______ the income statement because the _______ _______ or _____ _____ for the _______ must be reported in this statement.

50. Financial Statements – _______ _______ _______ _______ is carried to the _______ of _______ _______.

51. From the _______ _______ To the _______ _______ Financial Statements – _______ of _______ _______ (continued)

52. _______ _______ o A balance sheet is a list of the _______, _______, and _______ _______ as of a _______ _______.

53. _______ _______ o The _______ form of a _______ _______ lists the assets on the _______ and the _______ and _______ _______ on the right. It resembles the basic format of the _______ _______.

54. This amount is compared to the net _______ _______ on the _______ of _______ _______. From the _______ of _______ _______ Financial Statements – _______ _______ (continued)

55. _______ of Cash _______ o A _______ _______ _______ _______ is a summary of the cash _______ and cash _______ for a _______ _______ of time.  It consists of three sections: (1) _______________________________ (2) _______________________________ (3) _______________________________

56. This amount should match _______ on the _______ _______ Financial Statements – _______ of _______ _______ (concluded)

57. Cash Flows from _______ _______ o The cash flows from _______ _______ section reports a summary of cash _______ and cash _______ from operations.

58. Cash Flows from _______ _______ o The cash flows from _______ _______ section reports the cash transactions for the _______and _______ of relatively permanent assets.

59. Cash Flows from _______ _______ o The cash flows from _______ _______ section reports the cash _______ related to cash _______ by the _______, _______, and _______ by the owner.

60. I NTERRELATIONSHIPS A MONG F INANCIAL S TATEMENTS _______ _______ and Statement of _______ _______  Net _______ or _____ ________ reported on the _______ _______ is also reported on the _______ of _______ _______ and any additional _______ by the _______ during the year.

61. Interrelationships Among Financial Statements o In Exhibit 6, NetSolutions’ net income of $3,050 for November is added to Chris Clark’s investment of $25,000 in the statement of owner’s equity.

62. I NTERRELATIONSHIPS A MONG F INANCIAL S TATEMENTS Statement of _______ _______ and _______ _______  The owner’s _______ at the end of the period is reported on the statement of _______ _______ and is also reported on the _______ _______ as _______ capital.

63. Interrelationships Among Financial Statements o In Exhibit 6, Chris Clark, Capital of $26,050 as of November 30, 2013, on the statement of owner’s equity also appears on the November 30, 2013, balance sheet as Chris Clark, Capital.

64. I NTERRELATIONSHIPS A MONG F INANCIAL S TATEMENTS _______ _______ and _______ of _______ Flows  The _______ reported on the _______ _______ is also reported as the _____-of- period cash on the statement of _______ ______.

65. Interrelationships Among Financial Statements o In Exhibit 6, cash of $5,900 reported on the balance sheet as of November 30, 2013, is also reported on the November statement of cash flows as the end-of-period cash.

66. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe and illustrate the use of the ratio of liabilities to owner’s equity in evaluating a company’s financial condition. 6

67. R ATIO OF L IABILITIES TO O WNER ’ S E QUITY Ratio of Liabilities to Owner’s Equity = Total Owner’s Equity (or ) Ratio of Liabilities to Owner’s Equity = $ = _______

68. c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Introduction to Accounting and Business The End