© 2000 South-Western Educational Publishing ACCOUNTING & ACCOUNTING SYSTEMS n P R A I –Planning –Recording –Analyzing –Interpreting financial information n Accounting System –A planned process for providing financial information that will be useful to management

© 2000 South-Western Educational Publishing ACCOUNTING RECORDS & SERVICE BUSINESS n Accounting Records –Organized summaries of a business’s financial activities. n Service Business –A business that performs an activity for a fee EXAMPLES: Laundry service, house cleaning, landscaping, etc.

© 2000 South-Western Educational Publishing PROPRIETORSHIP n A business owned and operated by one person –ENCORE MUSIC

© 2000 South-Western Educational Publishing ASSETS & LIABILITIES n ASSETS –Anything of value that is owned Example: –Personal assets - Car, house, clothing, etc. –Business assets – Cash, Supplies and Prepaid Insurance n LIABILITIES –An amount that a business owes Example: –Personal liability – Credit cards, mortgage, etc. –Business liability – Buying supplies on account (credit)

© 2000 South-Western Educational Publishing EQUITIES & OWNER’S EQUITY n Equities –Financial rights to the assets of a business Business has two types of equity –Equity of those to whom money is owed »Example: Encore Music buys supplies and agrees to pay for them at a later time. (Credit) –Equity of the owner »Example: Owner of Encore Music invests personal money to start her business. n Owner’s Equity –The amount remaining after the value of all liabilities is subtracted from the value of all assets.

© 2000 South-Western Educational Publishing THE ACCOUNTING EQUATION Lesson 1-1, page 7

© 2000 South-Western Educational Publishing T ERMS REVIEW accounting accounting system accounting records service business proprietorship Lesson 1-1, page 8 asset equities liability owner’s equity accounting equation