2 Accounting-planning, recording, analyzing, and interpreting financial information. PublicPrivate$62,000-$109,000Accounting ClerkPayroll ClerkWhat is Accounting?
3 Accounting system-a planned process for providing financial information that will be useful by managementAccounting records-organized summaries of a business’s financial activitiesWhat is Accounting?
4 What is Accounting? “Accounting is the language of business” Many companies have failed due to inaccurate accounting recordsUnderstanding accounting helps managers and owners make better business decisions.What is Accounting?
5 The principles of right and wrong that guide an individual in making decisions This the action legal?Does the action violate company or professional standards?Who is affected and how by the action?Business Ethics
6 Business Ethics GAAP-Generally accepted accounting principles Refer to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or standard accounting practice. These include the standards, conventions, and rules that accountants follow in recording and summarizing and in the preparation of financial statements.Business Ethics
7 The Accounting Equation Service Business- a business that performs an activity for a feeProprietorship- a business owned by one personAlso referred to a sole proprietorshipName some proprietorship's in and around the Mapleton areaThe Accounting Equation
8 The Accounting Equation Assets- anything of value owned by the companyCashSuppliesPrepaid Insurance**Make sure to keep personal assets separate.The Accounting Equation
9 The Accounting Equation Equities- financial rights to the assets of a businessTwo different types1. Equity of those to whom the money is owedAn amount of money owed by a business is called a liability2.Equity of the OwnerThe Accounting Equation
10 The Accounting Equation Equities- financial rights to the assets of a businessTwo different types2. Equity of the ownerThe amount remaining after the value of all assets.The Accounting Equation
12 The Accounting Equation Assets=Liabilities and Owner’s EquityLeft SideRight SideThe accounting equation MUST be in balance to be correctThe Accounting Equation
13 How Business Activities Change the Accounting Equation Transaction- A business activity that changes assets, liabilities and O.EExample: a business that pays cash for supplies.**AFTER EACH TRANSACTION THE ACCOUNTING EQUATION MUST REMAIN IN BALANCE**How Business Activities Change the Accounting Equation
14 How Business Activities Change the Accounting Equation Account- is the single item in the accounting equationAccount title- the name given to the accountExample- Cash, Supplies, Prepaid InsuranceAccount Balance- The amount of money in the accountCapital- the account being used to summarize the owner’s equity accountHow Business Activities Change the Accounting Equation
15 How Business Activities Change the Accounting Equation TransactionsAug. 1 Received cash from owner as investment, $10,000Aug. 2 Paid cash for supplies, $1,577Aug. 3 Paid cash for insurance, $1,200Aug. 7 Bought supplies on account from Living Music Supplies $2,720Aug. 9 Paid cash to Living Music Supplies, $900How Business Activities Change the Accounting Equation
16 Preparing a Balance Sheet Top 3 linesName of the businessThe name of the report (Balance Sheet)The date September 10, 2013Left hand column“Assets” centered on the top lineUnder the “Assets” heading write each asset account and the amount in the second columnPreparing a Balance Sheet
17 Preparing a Balance Sheet Left hand column“Assets” centered on the top lineUnder the “Assets” heading write each asset account and the amount in the second columnPreparing a Balance Sheet
18 Preparing a Balance Sheet Right hand column“Liabilities” centered on the top lineUnder the “Liabilities” heading write each liability account and the amount in the second column** Skip one line**Preparing a Balance Sheet
19 Preparing a Balance Sheet Right hand columnWrite “Owner’s Equity” centered one line down from the liabilities account.Under the “Owner’s Equity” heading write the owner’s equity account and the amount in the second columnPreparing a Balance Sheet
20 Preparing a Balance Sheet Under the list of assets, write “Total Assets”Add up all the asset amounts and write the total next to the “Total Assets” lineUnder the list of liabilities and OE, write “Total Liabilities’ and Owner’s Equity”Add up all the liabilities' amounts and OE amounts and write the total next to the “Total Liabilities’ amounts and OE”Preparing a Balance Sheet
21 Preparing a Balance Sheet Ask yourself, Do they match?If yes, double underline the totalsIf no, re-check your work to find the error.You have successfully made a Balance Sheet!!Preparing a Balance Sheet
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