1. How can values be expressed in multiple ways?
Accounting
Week 1
What basic math skills are necessary for success in accounting and finance?
How does one determine the appropriate mathematical to use for various business situation?
How can values be expressed in multiple ways?
How does one calculate the total amount due for a loan or a purchase?
What is Accounting?
What is the Accounting Equation?

2. Business Entity Concept
The Accounting Equation
Accounting
Accounting System
Accounting Records
Service Business
Proprietorship
Asset
Equities
Liability
Owner’s Equity
Accounting Equation
Business Entity Concept

3. Doesn’t have to be paid off, could still be making payments
Assets
Liabilities
Owner’s Equity
Items OWNED by a business that will provide future benefits.
Probable future outflow of assets as a result of a past transaction or even.
Amount by which the business assets exceed the business liabilities.
Doesn’t have to be paid off, could still be making payments
In other words, debts or obligations of the business that can be paid with cash, goods, or services
“Net Worth” or “Capital”
CASH
MERCHANDISE
FURNITURE
FIXTURES
MACHINERY
BUILDINGS
LAND
Accounts Receivable
Once the debts are paid,
the remaining assets belong
to the owner (Owner’s Equity).
NOTES PAYABLE
ACCOUNTS PAYABLE

4. Doesn’t have to be paid off, could still be making payments
Assets
Items OWNED by a business that will provide future benefits.
Accounts Receivable
Doesn’t have to be paid off, could still be making payments
The amount of money owed to the business by its customers
As a result of making sales “on account” or “on credit”
Simply, customers who have promised to pay sometime in the future
CASH
MERCHANDISE
FURNITURE
FIXTURES
MACHINERY
BUILDINGS
LAND
Accounts Receivable

5. Liabilities
Notes Payable
Probable future outflow of assets as a result of a past transaction or even.
Formal written promises to pay suppliers or lenders
Specific sums of money at definite future times
In other words, debts or obligations of the business that can be paid with cash, goods, or services
NOTES PAYABLE
ACCOUNTS PAYABLE
Accounts Payable
Unwritten promise to pay a supplier for assets purchased or services rendered
Referred to as making a purchase “on account” or “on credit”
Be careful!! Don’t confuse Accounts Receivable and Accounts Payable.
Ask yourself, are we waiting to receive?
Or waiting to pay?

6. BUSINESS ENTITY CONCEPT
 In accounting we treat a business or an organization and its owners as two separately identifiable parties.
Owner may have business assets and liabilities and nonbusiness assets and liabilities
Nonbusiness assets and liabilities are not included in the entity’s accounting records
If owner invests money or other assets in the business, the item is now a business asset

7. BUSINESS TRANSACTION
An economic event that has a direct impact on the business
Usually requires an exchange with an outside entity
Must be able to measure this exchange in dollars
All transactions affect the accounting equation through specific accounts

8. ANALYZING BUSINESS TRANSACTIONS
THREE QUESTIONS:
What Happened?
Which accounts are affected?
How is the Accounting Equation affected?

9. Cash & Capital (Accounts) Assets & Owner’s Equity
Let’s Analyze
Mary Adams Consulting
MARY ADAMS, THE OWNER, INVESTED $25,000 IN THE BUSINESS
Question #1: What Happened?
Question #2: Identify Accounts that are Affected/Classify the Accounts
Question #3: Determine whether the accounts have increased or decreased. #3
Cash & Capital
Increased & Increased #1
Mary took $25,000 from her
personal bank account and deposited it in a new account in the business’ name #2
Cash & Capital (Accounts)
Assets & Owner’s Equity

10. Does accounting equation balance?+
ASSETS =
LIABILITIES
OWNER’S EQUITY
CASH =
M. A.,CAPITAL
+$25,000 =
+$25,000

11. Purchased office supplies for $800
Let’s Analyze
Mary Adams Consulting
PURCHASED OFFICE SUPPLIES FOR $800 CASH
Question #1: What Happened?
Question #2: Identify Accounts that are Affected/Classify the Accounts
Question #3: Determine whether the accounts have increased or decreased. #3
Office Supplies Cash
Increased Decreased #1
Purchased office supplies for $800 #2
Office Supplies & Cash
Assets Assets

12. Let’s look at the accounting Equation+
ASSETS
LIAB. =
O. E. +
CASH
OFF. SUPPLIES = +
+$800
-$800 =
Right hand side
of equation is
not affected

13. RECEIVING CASH
Transaction 1 August 1. Received cash from owner as an investment, $10,

14. PAYING CASH
Transaction 2 August 3. Paid cash for supplies, $1,
Transaction 3 August 4. Paid cash for insurance, $1,
These two transactions only affected the asset side of the equation – demonstrating that you won’t always have entries on each side of the equation

15. TRANSACTIONS ON ACCOUNT
Transaction 4 August 7. Bought supplies on account from Ling Music Supplies, $2,
Transaction 5 August 11. Paid cash on account to Ling Music Supplies, $1,