1 - 1 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Accounting Concepts and Procedures: An Introduction Chapter 1

1 - 2 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Objective 1 Defining and listing the functions of accounting.

1 - 3 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Accounting ManagersOwnersManagersOwnersInvestorsGovernmentInvestorsGovernment

1 - 4 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Sole Proprietorship PartnershipPartnership CorporationCorporation Categories of Business Organizations

1 - 5 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Types of Business Organizations Ownership Business owned by one person. Formation Easy to form. Owner could lose personal assets to meet obligations of business. Liability Closing Ends with death of owner or closing of business.

1 - 6 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Types of Business Organizations Business owned by more than one person. Ownership Easy to form. Formation Ends with death of partner or exit of a partner. Closing Partners could lose personal assets to meet obligations of partnership. Liability

1 - 7 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Types of Business Organizations Business owned by stockholders. Ownership More difficult to form. Formation Can continue indefinitely. Closing Limited personal risk. Stockholders’ loss is limited to their investment in the company. Liability

1 - 8 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Classifying Business Organizations Service businesses provide services. Merchandise businesses sell products. Manufacturing businesses make products.

1 - 9 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Definition of Accounting Accounting is the process that... analyzes,records,classifies,summarizes, reports, and... interprets financial information. Accounting is the process that... analyzes,records,classifies,summarizes, reports, and... interprets financial information.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Objective 2 Recording transactions in the basic accounting equation.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-1 (The Accounting Equation) Assets are the items owned by the business. Assets are the items owned by the business. Equities are the claims against the assets. Equities are the claims against the assets.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-1 (The Accounting Equation) Liabilities are the creditor’s equity. Liabilities are the creditor’s equity. Owner’s equity is the rights of ownership. Owner’s equity is the rights of ownership.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-1 (The Accounting Equation) Assets – Liabilities = Owner’sEquity

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-1 (The Accounting Equation) A. August 28: Cathy Hall invested $7,000 in cash and $800 of office equipment into the business. A. August 28: Cathy Hall invested $7,000 in cash and $800 of office equipment into the business. B. August 29: Law practice buys office equipment for cash $900. B. August 29: Law practice buys office equipment for cash $900. C. August 30: Buys additional office equipment on account $400. C. August 30: Buys additional office equipment on account $400.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-1 (The Accounting Equation) $8,200 = $8,200 a)Cash+$7,000+$7,800 a) Equipment+ 800 b)Cash– 900 Equipment+ 900 Equipment a)Cash+$7,000+$7,800 a) Equipment+ 800 b)Cash– 900 Equipment+ 900 Equipment Assets=Liabilities+Owner’sEquity

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-1 (Shift in Assets) The makeup of the assets has changed, but the total of the assets remains the same. The makeup of the assets has changed, but the total of the assets remains the same.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-2 (The Balance Sheet) The balance sheet shows the company’s financial position as of a particular date. The balance sheet shows the company’s financial position as of a particular date. Company name Name of the statement DateDate

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-2 (The Balance Sheet) Cathy Hall, Attorney-at-Law Balance Sheet August 31, 200x Assets Cash$6,100 Equipment 2,100 Total$8,200 Assets Cash$6,100 Equipment 2,100 Total$8,200 Liabilities and Owner’s Equity Liabilities and Owner’s Equity Accounts Payable$ 400 Owner’s Equity Cathy Hall, Capital 7,800 Total$8,200 Liabilities and Owner’s Equity Liabilities and Owner’s Equity Accounts Payable$ 400 Owner’s Equity Cathy Hall, Capital 7,800 Total$8,200

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Seeing how revenue, expenses, and withdrawals expand the basic accounting equation. Learning Objective 3

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-3 (The Accounting Equation Expanded) An expanded accounting equation includes the following: Revenues (cash, accounts receivable) ExpensesWithdrawals An expanded accounting equation includes the following: Revenues (cash, accounts receivable) ExpensesWithdrawals

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-3 (The Accounting Equation Expanded) RevenuesRevenues Net income or Net loss Net income or Net loss –= ExpensesExpenses

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-3 (The Accounting Equation Expanded) BeginningcapitalPLUSAdditionalinvestmentBeginningcapitalPLUSAdditionalinvestment Net income WithdrawalsWithdrawals +–

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-3 (The Accounting Equation Expanded) D. September 1-30: Cathy Hall provided legal services for cash, $3,000. D. September 1-30: Cathy Hall provided legal services for cash, $3,000. E. September 1-30: Provided legal services on account, $4,000. E. September 1-30: Provided legal services on account, $4,000. F. September 1-30: Received $700 cash as partial payment from previous services performed on account. F. September 1-30: Received $700 cash as partial payment from previous services performed on account. G. September 1-30 paid salaries expense, $600.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-3 (The Accounting Equation Expanded) H. September 1-30: Paid rent expense, $700. I. September 1-30: Incurred advertising expenses of $300, to be paid next month. I. September 1-30: Incurred advertising expenses of $300, to be paid next month. J. September 1-30: Cathy withdrew $200 for personal use. J. September 1-30: Cathy withdrew $200 for personal use.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Objective 4 Preparing an income statement, a statement of owner’s equity, and a balance sheet.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-4 (Preparing Financial Statements) Cathy Hall, Attorney-at-Law Income Statement For Month Ended September 30, 200x Revenue: Legal fees$7,000 Legal fees$7,000 Operating expenses: Salaries expense$600 Salaries expense$600 Rent expense 700 Rent expense 700 Advertising expense 300 1,600 Advertising expense 300 1,600 Net income$5,400 Revenue: Legal fees$7,000 Legal fees$7,000 Operating expenses: Salaries expense$600 Salaries expense$600 Rent expense 700 Rent expense 700 Advertising expense 300 1,600 Advertising expense 300 1,600 Net income$5,400

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-4 (Preparing Financial Statements) Cathy Hall, Attorney-at-Law Statement of Owner’s Equity Statement of Owner’s Equity For Month Ended September 30, 200x Cathy Hall, Capital, Sept. 1, 200x$ 7,800 Net Income for Sept.$5,400 Less Withdrawals for Sept. 200 Increase in Capital 5,200 Cathy Hall, Capital, Sept. 30, 200x$13,000 Cathy Hall, Capital, Sept. 1, 200x$ 7,800 Net Income for Sept.$5,400 Less Withdrawals for Sept. 200 Increase in Capital 5,200 Cathy Hall, Capital, Sept. 30, 200x$13,000

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Learning Unit 1-4 (Preparing Financial Statements) Cathy Hall, Attorney-at-Law Balance Sheet September 30, 200x Assets Cash$ 8,300 Accts. Rec. 3,300 Equipment 2,100 Total$13,700 Assets Cash$ 8,300 Accts. Rec. 3,300 Equipment 2,100 Total$13,700 Liabilities and Owner’s Equity Liabilities and Owner’s Equity Accounts Payable$ 700 Owner’s Equity Cathy Hall, Capital 13,000 Cathy Hall, Capital 13,000 Total$13,700 Liabilities and Owner’s Equity Liabilities and Owner’s Equity Accounts Payable$ 700 Owner’s Equity Cathy Hall, Capital 13,000 Cathy Hall, Capital 13,000 Total$13,700

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater Generally Accepted Accounting Principles (GAAP) These are the procedures and guidelines that must be followed during the accounting process. These are the procedures and guidelines that must be followed during the accounting process.

© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater End of Chapter 1