Presentation is loading. Please wait.

Presentation is loading. Please wait.

Starting a Proprietorship Chapter 1. What is Accounting? Accounting-planning, recording, analyzing, and interpreting financial information. ◦Public ◦Private.

Similar presentations


Presentation on theme: "Starting a Proprietorship Chapter 1. What is Accounting? Accounting-planning, recording, analyzing, and interpreting financial information. ◦Public ◦Private."— Presentation transcript:

1 Starting a Proprietorship Chapter 1

2 What is Accounting? Accounting-planning, recording, analyzing, and interpreting financial information. ◦Public ◦Private  $62,000-$109,000 ◦Accounting Clerk ◦Payroll Clerk

3 What is Accounting? Accounting system-a planned process for providing financial information that will be useful by management Accounting records-organized summaries of a business’s financial activities

4 What is Accounting? “Accounting is the language of business” Many companies have failed due to inaccurate accounting records Understanding accounting helps managers and owners make better business decisions.

5 Business Ethics 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?

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.

7 The Accounting Equation Service Business- a business that performs an activity for a fee Proprietorship- a business owned by one person ◦Also referred to a sole proprietorship ◦Name some proprietorship's in and around the Mapleton area

8 The Accounting Equation Assets- anything of value owned by the company ◦Cash ◦Supplies ◦Prepaid Insurance  **Make sure to keep personal assets separate.

9 The Accounting Equation Equities- financial rights to the assets of a business ◦Two different types ◦1. Equity of those to whom the money is owed  An amount of money owed by a business is called a liability ◦2.Equity of the Owner

10 The Accounting Equation Equities- financial rights to the assets of a business ◦Two different types ◦2. Equity of the owner  The amount remaining after the value of all assets.

11 The Accounting Equation Assets = Liabilities + Owner’s Equity

12 The Accounting Equation Assets=Liabilities and Owner’s Equity Left Side Right Side The accounting equation MUST be in balance to be correct

13 How Business Activities Change the Accounting Equation Transaction- A business activity that changes assets, liabilities and O.E ◦Example: a business that pays cash for supplies.  **AFTER EACH TRANSACTION THE ACCOUNTING EQUATION MUST REMAIN IN BALANCE**

14 How Business Activities Change the Accounting Equation Account- is the single item in the accounting equation Account title- the name given to the account ◦Example- Cash, Supplies, Prepaid Insurance Account Balance- The amount of money in the account Capital- the account being used to summarize the owner’s equity account

15 How Business Activities Change the Accounting Equation Transactions ◦Aug. 1 Received cash from owner as investment, $10,000 ◦Aug. 2 Paid cash for supplies, $1,577 ◦Aug. 3 Paid cash for insurance, $1,200 ◦Aug. 7 Bought supplies on account from Living Music Supplies $2,720 ◦Aug. 9 Paid cash to Living Music Supplies, $900

16 Preparing a Balance Sheet Top 3 lines ◦Name of the business ◦The name of the report (Balance Sheet) ◦The date September 10, 2013 Left hand column ◦“Assets” centered on the top line ◦Under the “Assets” heading write each asset account and the amount in the second column

17 Preparing a Balance Sheet Left hand column ◦“Assets” centered on the top line ◦Under the “Assets” heading write each asset account and the amount in the second column

18 Preparing a Balance Sheet Right hand column ◦“Liabilities” centered on the top line ◦Under the “Liabilities” heading write each liability account and the amount in the second column ◦** Skip one line**

19 Preparing a Balance Sheet Right hand column ◦Write “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 column

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” line Under 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”

21 Preparing a Balance Sheet Ask yourself, Do they match? ◦If yes, double underline the totals ◦If no, re-check your work to find the error. ◦You have successfully made a Balance Sheet!!


Download ppt "Starting a Proprietorship Chapter 1. What is Accounting? Accounting-planning, recording, analyzing, and interpreting financial information. ◦Public ◦Private."

Similar presentations


Ads by Google