1. Lesson 1-1 The Accounting Equation
8/3/2018
LESSON 1-1
The Accounting Equation

2. Lesson 1-1
What Is Accounting?
Accounting is the process of planning, recording, analyzing, and interpreting financial information.
An accounting system is a planned process designed to compile financial data and summarize the results in accounting records and reports.
Organized summaries of a business’ financial activities are called accounting records.
Financial reports that summarize the financial condition and operations of a business are called financial statements.
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3. The Business – TechKnow Consulting
Lesson 1-1
The Business – TechKnow Consulting
A business that performs an activity for a fee is called a service business.
A proprietorship is a business owned by one person.
A proprietorship is sometimes referred to as a sole proprietorship.
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4. Accounting in Personal Life
Lesson 1-1
Accounting in Personal Life
LO2
Anything of value that is owned is called an asset.
An amount owed is called a liability.
Financial rights to the assets are called equity.
Owner’s Equity is the amount remaining after the value of all liabilities is subtracted from the value of all the assets.
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5. THE ACCOUNTING EQUATION
Lesson 1-1
8/3/2018
THE ACCOUNTING EQUATION
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LESSON 1-1

6. Lesson 1-1
Ethics in Business
LO2
The principles of right and wrong that guide an individual in making decisions are called ethics.
The use of ethics in making business decisions is called business ethics.
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7. LESSON 1-2 How Business Activities Change the Accounting Equation
8/3/2018
LESSON 1-2
How Business Activities Change the Accounting Equation

8. Lesson 1-2
Receiving Cash
LO4
Accountants call any business activity that changes assets, liabilities, or owner’s equity a transaction.
A record that summarizes all the transactions pertaining to a single item in the accounting equation is called an account.
The name given to an account is called an account title.
The difference between the increases and decreases in an account is called the account balance.
An account used to summarize the owner’s equity in a business is called a capital account.
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9. RECEIVING CASH
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Transaction 1 August 1. Received cash from owner as an investment, $5,
LESSON 1-2

10. PAYING CASH Transaction 2 August 3. Paid cash for supplies, $275.00.
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Transaction 2 August 3. Paid cash for supplies, $
Transaction 3 August 4. Paid cash for insurance, $1,
LESSON 1-2

11. TRANSACTIONS ON ACCOUNT
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Transaction 4 August 7. Bought supplies on account from Supply Depot, $
Transaction 5 August 11. Paid cash on account to Supply Depot, $
LESSON 1-2

12. How Transactions Change Owner’s Equity in an Accounting Equation
Lesson 1-3
8/3/2018
LESSON 1-3
How Transactions Change Owner’s Equity in an Accounting Equation
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13. Transactions Affecting Owner’s Equity
Lesson 1-3
Transactions Affecting Owner’s Equity
LO6
An increase in equity resulting from the sale of goods or services is called revenue.
A sale for which payment will be received at a later date is called a sale on account.

14. REVENUE TRANSACTIONS
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Transaction 6 August 12. Received cash from sales, $
Transaction 7 August 12. Sold services on account to Oakdale School, $
LESSON 1-3

15. Lesson 1-3
Expense Transactions
LO7
Unlike a liability, which is an amount that is owed, the cost of goods or services used to operate a business is called an expense.

16. EXPENSE TRANSACTIONS
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Transaction 8 August 12. Paid cash for rent, $
Transaction 9 August 12. Paid cash for telephone bill, $40.00.
LESSON 1-3

17. Other Cash Transactions
Lesson 1-3
Other Cash Transactions
Assets taken from the business for the owner’s personal use are called withdrawals.

18. OTHER CASH TRANSACTIONS
Lesson 1-3
8/3/2018
OTHER CASH TRANSACTIONS
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Transaction 10 August 18. Received cash on account from Oakdale School, $
Transaction 11 August 18. Paid cash to owner for personal use, $
LESSON 1-3
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19. Summary of Changes in Owner’s Equity
Lesson 1-3
Summary of Changes in Owner’s Equity