1. Accounting Concepts and Procedures: An Introduction
Chapter 1 2

2. Defining and listing the functions of accounting.
Learning Objective 1
Defining and listing the
functions of accounting. 3

3. Accounting is the language of business.
Managers
Owners
Insiders
Investors
Government
Outsiders
Bookkeeping 3

4. Categories of Business Organizations
Sole Proprietorship
Partnership
Corporation

5. Types of Business Organizations
Sole Propriertorship
Ownership
Business owned by one person.
Formation
Easy to form.
Owner could lose personal
assets to meet obligations
of business.
Liability
Closing
Ends with death of owner
or closing of business. 7

6. Types of Business Organizations
Partnership
Ownership
Business owned by
more than one person.
Easy to form.
Formation
Partners could lose personal
assets to meet obligations
of partnership.
Liability
Ends with death of partner
or exit of a partner.
Closing 7

7. Types of Business Organizations
Corporation
Ownership
Business owned by stockholders.
More difficult to form.
Formation
Limited personal risk.
Stockholders’ loss is limited to
their investment in the company.
Liability
Can continue indefinitely.
Closing 7

8. Classifying Business Organizations
Service businesses provide services.
Merchandise businesses sell products.
Manufacturing businesses make products.

9. Definition of Accounting
Accounting is the process that...
analyzes,
records,
classifies,
summarizes,
reports, and...
interprets financial information.

10. Recording transactions in the basic accounting equation.
Learning Objective 2
Recording transactions in the
basic accounting equation. 3

11. Learning Unit 1-1 (The Accounting Equation)
Assets = Equities
Assets are the
items owned by
the business.
Equities are
the claims
against the
assets. 11

12. Learning Unit 1-1 (The Accounting Equation)
Assets = Liabilities + Owner's Equity
Liabilities are
the creditor’s
equity.
Owner’s equity
is the rights
of ownership. 11

13. Learning Unit 1-1 (The Accounting Equation)
Assets
Liabilities –
Owner’s
Equity =

14. Learning Unit 1-1 (The Accounting Equation)
Transactions:
A. August 28: Cathy Hall invested
$7,000 in cash and $800 of office
equipment into the business.
B. August 29: Law practice buys
office equipment for cash $900.
C. August 30: Buys additional
office equipment on account $400.

15. Learning Unit 1-1 (The Accounting Equation)
a) Cash + $7, $7,800
a) Equipment
b) Cash –
Equipment
Equipment
Assets =
Liabilities +
Owner’s
Equity
$8,200 = $8,200

16. Learning Unit 1-1 (Shift in Assets)
The makeup of the assets has
changed, but the total of the
assets remains the same.

17. Learning Unit 1-2 (The Balance Sheet)
The balance sheet shows the company’s
financial position as of a particular date.
Company name
Name of the statement
Date

18. Learning Unit 1-2 (The Balance Sheet)
Cathy Hall, Attorney-at-Law
Balance Sheet
August 31, 200x
Assets
Cash $6,100
Equipment 2,100
Total $8,200
Liabilities and Owner’s Equity
Accounts Payable $ 400
Owner’s Equity
Cathy Hall, Capital 7,800
Total $8,200 15

19. Seeing how revenue, expenses, and withdrawals expand the
Learning Objective 3
Seeing how revenue, expenses,
and withdrawals expand the
basic accounting equation. 3

20. Learning Unit 1-3 (The Accounting Equation Expanded)
An expanded accounting equation
includes the following:
Revenues (cash, accounts receivable)
Expenses
Withdrawals

21. Learning Unit 1-3 (The Accounting Equation Expanded)
Revenues –
Expenses =
Net income or
Net loss

22. Learning Unit 1-3 (The Accounting Equation Expanded)
Owner's Equity
Beginning
capital
PLUS
Additional
investment +
Net income –
Withdrawals

23. Learning Unit 1-3 (The Accounting Equation Expanded)
D. September 1-30: Cathy Hall provided
legal services for cash, $3,000.
E. September 1-30: Provided legal
services on account, $4,000.
F. September 1-30: Received $700
cash as partial payment from previous
services performed on account.
G. September 1-30 paid salaries expense, $600.

24. Learning Unit 1-3 (The Accounting Equation Expanded)
H. September 1-30: Paid rent expense, $700.
I. September 1-30: Incurred advertising
expenses of $300, to be paid next month.
J. September 1-30: Cathy
withdrew $200 for personal use.

25. Learning Objective 4 Preparing an income statement, a statement
of owner’s equity,
and a balance sheet. 3

26. Learning Unit 1-4 (Preparing Financial Statements)
Cathy Hall, Attorney-at-Law
Income Statement
For Month Ended September 30, 200x
Revenue:
Legal fees $7,000
Operating expenses:
Salaries expense $600
Rent expense
Advertising expense ,600
Net income $5,400 15

27. Learning Unit 1-4 (Preparing Financial Statements)
Cathy Hall, Attorney-at-Law
Statement of Owner’s Equity
For Month Ended September 30, 200x
Cathy Hall, Capital, Sept. 1, 200x $ 7,800
Net Income for Sept. $5,400
Less Withdrawals for Sept
Increase in Capital ,200
Cathy Hall, Capital, Sept. 30, 200x $13,000 15

28. Learning Unit 1-4 (Preparing Financial Statements)
Cathy Hall, Attorney-at-Law
Balance Sheet
September 30, 200x
Assets
Cash $ 8,300
Accts. Rec ,300
Equipment ,100
Total $13,700
Liabilities and Owner’s Equity
Accounts Payable $
Owner’s Equity
Cathy Hall, Capital 13,000
Total $13,700 15

29. Generally Accepted Accounting Principles (GAAP)
These are the procedures and guidelines
that must be followed during
the accounting process. 15

30. End of Chapter 1