1. Accounting
BBI2O

2. What is Accounting?
The process of recording, analyzing and interpreting the economic activities of a business

3. Accounting Concepts Inventory Cash Key Concepts
Double-Entry Bookkeeping
Inventory Cash
+$ $300

4. Balance Sheet Assets Liabilities - Account Payable Owner’s Equity
Cash
A/R
Inventory
Building
Liabilities
- Account Payable
Bank loan
Mortgage
Owner’s Equity
Or Net Worth
Or Personal Equity

5. What is GAAP?
G – Generally A – Accepted A – Account P – Principals

6. Balance Sheet
Share Holders
Government
Investors
Creditors

7. Key Terms Net Worth/Personal Equity Asset Liability Equity Income
Expenses

8. Key Terms Asset Liability Something of value owned by the business
Debts or amounts owed to others

9. Key Terms
Equity
What you would have left after you have paid off your debts
The Accounting Equation:
Assets – Liabilities = Owner’s Equity

10. Key Terms Revenue Expenses
Money that business generates from business activities (i.e. sales)
Expenses
Money that the business must pay to carry on business activities (i.e. rent)

11. Key Terms Profit Assets= Revenue - Expenses
The money that the business has earned after all expenses are paid
Assets= Revenue - Expenses

12. Calculating your Net Worth
Your net worth is a measure of how valuable you are in terms of $$$.
On a piece of paper make two columns:
OWN OWE
List all the items and their approx $ value that you own and any monies that you may owe.
Net worth = own – owe
Are any of your assets more liquid than others?

13. Homework Read p. 273 – 280 in the textbook Answer questions on p. 280
Review Questions 1 to 6

14. Accounting:
The Basics

15. Net Worth
AKA your “financial position”
How do we calculate it?

16. What is…
An Asset
A Liability
Equity

17. The Balance Sheet So, we know how to calculate financial position.
The formal way to do this is in a balance sheet
A balance sheet is a statement showing the financial position of a person, business, or other organization

18. A Sample Balance Sheet

19. The Balance Sheet Set up in the form of the basic accounting equation:
A = L + E
Assets on left, liabilities and equity on right
3 line heading
Who?
What?
When?
Assets listed in order of liquidity
Liabilities listed in order in which they must be paid

20. The Balance Sheet for a small business
Who?
What?
When?

21. Accounts Receivable
Customers buy goods with the understanding that they’ll pay later
They owe money to you, and so these debts represent a dollar value to the business
Also known as A/R

22. Accounts Payable Same deal.
You may owe money, for example to a supplier, so you’re in debt
This is an obligation or liability
Also known as A/P