Presentation on theme: "What is Accounting Accounting is Planning, Recording, Analyzing and Interpreting financial information A planned process for providing financial information."— Presentation transcript:
What is Accounting Accounting is Planning, Recording, Analyzing and Interpreting financial information A planned process for providing financial information that will be useful to management is called an accounting system.
What is Accounting Organized summarized of a business’s financial activities are called accounting records. Financial reports that summarize the financial condition and operations of a business are called financial statements.
What is Accounting Accounting is the language of business! Inaccurate business records often lead to business failure and bankruptcy
Types of Businesses Service Business Performs an activity for a fee MAKE A LIST OF SOME SERVICE BUSINESSES IN BRANDON A Business owned by one person is a proprietorship Owners must keep business and personal records separate (Concept: Business Entity) What are some advantages/disadvantages for a business to organize as a proprietorship? (Blue Box, page 7)
Accounting for a Proprietorship The Accounting Equation **IT’S ALL ABOUT BALANCE**
The Accounting Equation Assets are anything of value that is owned. Equities are the financial rights to the assets of the business. There are two types: (1) Equity of those to whom money is owed (2) Equity of the owner A liability is an amount owed by a business Owner’s Equity is the amount remaining after all the liabilities have been subtracted from the assets.
The Accounting Equation Assets = Liabilities + Owner’s Equity The left side must always equal the total amounts on the right side. Before a business starts, it’s accounting equation would show all zeros.
ETHICS Ethics are the principals of right and wrong that guide people into make decisions. Business Ethics is simply the use of ethics in making business decisions.
Lesson 2 Words to Know 1.Transaction 2.Account 3.Account title 4.Account balance 5.Capital
The Accounting Equation Set up in a chart (sometimes called a T Chart) Assets = Liabilities + Owner’s Equity $11,000 3,000 8,000 10,000 ? 6,000 63,000 35,000 ? ? 60,000 20,000
Working Together 1-2 Trans No. Assets = Liabilities + Owner’s Equity 12341234
Review so far… What is an asset? A liability? A transaction? If you RECEIVE cash, it’s a……… If you PAID cash, it’s a ……. Supplies & Prepaid Insurance are ____________ Buying Supplies on Account (you charged it) Listed as an ACCOUNT PAYABLE under LIABILITY (it’s a bill) When you make a payment on that account, the cash _______ AND then Account Payable also ____________.
Lesson 3 Words to Know 1.Revenue – an increase in owner’s equity from the result in the operation of the business (a sale) 2.Sale on account – a sale in which cash will be received at a later date (you charged them ) 3.Expense – decrease in owner’s equity resulting from the operation of a business (you pay a bill) 4.Withdrawal – assets taken from the business for the owner’s personal use (usually taken from cash, also subtracted from owner’s equity)
Lesson 3 Points… A withdrawal is NOT considered an expense because it’s not a result from an operation of the business. Expenses are BILLS such as rent, utilities, etc. Cash received on account (someone pays on their bill), the assets affected are CASH and ACCOUNTS RECEIVABLE! REMEMBER TO BALANCE BOTH SIDE AFTER EVERY 2/3 TRANSACTIONS If both sides are not equal, go back and double check your transactions