CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-1 The Accounting Equation

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 2 LESSON 1-1 THE ACCOUNTING EQUATION page 8

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 3 LESSON 1-1 TERMS REVIEW page 9 AccountingPlanning, recording, analyzing, and interpreting financial information. accounting systemA planned process for providing financial information that will be useful to management. accounting recordsOrganized summaries of a business’s financial activities. financial statementsFinancial reports that summarize the financial condition and operations of a business. service businessA business that performs an activity for a fee. proprietorshipA business owned by one person. Also known as a sole proprietorship AssetAnything of value that is owned. equitiesFinancial rights to the assets of a business. liabilityAn amount owed by a business. owner’s equityThe amount remaining after the value of all liabilities is subtracted from the value of all assets. accounting equationAn equation showing the relationship among assets, liabilities, and owner’s equity. Stated as : Assets = Liabilities + Owner’s Equity ethicsThe principles of right and wrong that guide an individual in making decisions. business ethicsThe use of ethics in making business decisions.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-2 How Business Activities Change the Accounting Equation

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 5 LESSON 1-2 RECEIVING CASH Transaction 1 August 1. Received cash from owner as an investment, $5, page 10

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 1-2 PAYING CASH Transaction 2 August 3. Paid cash for supplies, $ Transaction 3 August 4. Paid cash for insurance, $1, page 11

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON 1-2 TRANSACTIONS ON ACCOUNT Transaction 4 August 7. Bought supplies on account from Supply Depot, $ Transaction 5 August 11. Paid cash on account to Supply Depot, $ page 12

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 1-2 TERMS REVIEW page 13 transactionA business activity that changes assets, liabilities, or owner’s equity. accountA record summarizing all the information pertaining to a single item in the accounting equation. account titleThe name given to the account. account balanceThe amount in the account. capitalThe account used to summarize the owner’s equity in a business.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-3 How Transactions Change Owner’s Equity in an Accounting Equation

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 10 LESSON 1-3 REVENUE TRANSACTIONS Transaction 6 August 12. Received cash from sales, $ Transaction 7 August 12. Sold services on account to Oakdale School, $ page 14

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 11 LESSON 1-3 EXPENSE TRANSACTIONS Transaction 8 August 12. Paid cash for rent, $ Transaction 9 August 12. Paid cash for telephone bill, $ page 15

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 12 LESSON 1-3 OTHER CASH TRANSACTIONS Transaction 10 August 18. Received cash on account from Oakdale School, $ Transaction 11 August 18. Paid cash to owner for personal use, $ page 16

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 13 LESSON 1-3 TERMS REVIEW page 17 revenueAn increase in owner’s equity resulting from the operation of a business. sale on accountA sale for which cash will be received a t a later date. expenseA decrease in owner’s equity resulting from the operation of a business. withdrawalsAssets taken out of a business for the owner’s personal use. It is a decrease in owner’s equity.