1.  Important Considerations ◦ Assets ◦ Liabilities ◦ Owner’s equity Accounting Equation ◦ and the Accounting Equation. We’ll discuss more about these over the next few slides.

2.  Decide on a service business ◦ A service business  Sells services, not merchandise  Less complex and thus is a preferred scenario when time is limited  For purposes of the provided case, the service business is: LightSpeed ◦ “LightSpeed Networks: A Gaming Service”

3.  Asset ◦ Property or economic resources owned by a business or individual  Examples?  Liability ◦ Amounts owed to creditors  Examples?  Owner’s Equity ◦ Owner’s claim to or investment in the assets of a business  Examples?

4.  Determine what “things” are needed to start the business ◦ i.e., Cash Account, basic equipment, maybe a vehicle, supplies, etc. ASSETS  These are “things” that a business has possession and control of; we call these “things” ASSETS.

5.  Determine what liabilities the business may need to incur.  Plan to purchase at least one item “on-account.” LIABILITY ◦ This entails the use of a liability account, representing the amount owed for a purchase. The amount owed is called a LIABILITY.

6. ASSET LIABILITYNET WORTH  The difference between the total ASSET amount and the total LIABILITY amount is defined as NET WORTH.  The business proprietor is the owner ◦ The owner’s name should be included in the capital and drawing accounts  Accounts that represent increases/decreases to the Net Worth.  Typically investments/withdrawals made by the owner.

7.  AssetsLiabilitiesOwner’s Equity  Assets = Liabilities + Owner’s Equity  The accounting equation should never be “out of balance” ◦ If it is, then there is an error in the accounting records that must be located and corrected!  The Balance Sheet is the financial statement that contains the Asset, Liabilities and Owner’s Equity information for a moment in time.