2. AccountingAccounting –Planning, recording, analyzing, and interpreting financial information Accounting SystemAccounting System –A planned process for providing financial information that will be useful to management What is Accounting?

3. Accounting Records Accounting Records Organized summaries of a business’s financial activities Financial StatementsFinancial Statements –Financial Reports that summarize the financial condition and operations of a business What is Accounting?

4. Service BusinessService Business –Performs an activity for a fee Ex: McDonald’s cooks your food for youEx: McDonald’s cooks your food for you Proprietorship (Sole Proprietorship)Proprietorship (Sole Proprietorship) –A business owned by one person THE BUSINESS – TECHKNOW CONSULTING

5. Forming and Dissolving a Proprietorship Critical Thinking 1.Why do you think more businesses are organized as proprietorships than any other form of business organization? 2.What kinds of people do you think would be most successful as owners of a proprietorship? BUSINESS STRUCTURESBUSINESS STRUCTURES ( )

6. AssetAsset –Anything of value owned by a business EquitiesEquities –Financial rights to the assets of the business LiabilityLiability –Any amount owed by a business Assets= Liabilities + Owner’s Equity Left side amount Right side amount $0$0 + $0= The Accounting Equation

7. Owner’s EquityOwner’s Equity –The amount remaining after the value of all liabilities is subtracted from the value of all assets Accounting EquationAccounting Equation –Equation showing the relationship among assets, liabilities and owner’s equity

8. Accounting Scandals Rock the Financial World EthicsEthics –The principles of right and wrong that guide an individual in making decisions Business EthicsBusiness Ethics –The use of ethics in making business decisions CHARACTER COUNTSCHARACTER COUNTS ( )

9. Completing The Accounting Equation Assets = Liabilities + Owner’s Equity ______ = 3,000 + 8,00011,000 End of Lesson REVIEW REVIEW 10,000 = _______ + 6,000 63,000 = 35,000 + ______ 4,000 28,000 WORK TOGETHER 1-1

10. Receiving Cash Assets=Liabilities+ Owner’s Equity Cash Kim Park, Capital= $0 + $ 5,000 $ 5,000 $0

11. TransactionTransaction –Business activity that changes assets, liabilities, or owner’s equity AccountAccount –Record summarizing all information pertaining to a single item in the accounting equation Account TitleAccount Title –The name given to an account Account BalanceAccount Balance –The amount/value in an account CapitalCapital –Account used to summarize the owner’s equity

12. Assets = Liabilities Liabilities + Owner’s Equity Owner’s Equity = $0 - 275 $0$ 5,000 $0 Cash Kim Park, Capital +Supplies Prepaid Insurance + $0 + 275 $ 4,725 $ 275$0$ 5,000 - 1,200 + 1,200 $ 3,525$ 275$1,200$ 5,000 Paying Cash Paying Cash

13. Assets = Liabilities Liabilities + Owner’s Equity Owner’s Equity Cash Kim Park, Capital= +Supplies Prepaid Insurance + $0 $3,525$ 275$1,200$ 5,000 Accts. Pay. Supply Depot + + 500 $3,525 $ 775 $1,200 $ 500$ 5,000 - 300 $ 200 $3,225$ 775$1,200$ 5,000 Transactions on Account

14. End of Lesson REVIEW REVIEW WORK TOGETHER 1-2 Determining how transactions change an accounting equation Assets = Liabilities + Owner’s Equity Trans. No. 1. 2. 3. 4. + + + + + - --

15. Assets = Liabilities Liabilities + Owner’s Equity Owner’s Equity Cash Kim Park, Capital= $ 775 + 295 $ 200$3,225$ 5,000 +Supplies Prepaid Insurance + + 295 $3,520 $0$ 5,295 + 350 $3,520$ 350$1,200$ 5,645 + A/R Oakdale School A/P Supply Depot + $0 (revenue) $ 775 $1,200 $ 200 + 350 (revenue) Total of left side: Total of right side: $3,520$350$1,200$775 +++ = $5,845 $200$5,645 + = REVENUE TRANSACTIONS

16. RevenueRevenue –Increase in owner’s equity resulting from the operation of the business Sale on AccountSale on Account –Sale for which cash will be received at a later date ExpenseExpense –Decrease in owner’s equity resulting from the operation of a business WithdrawalsWithdrawals –Assets taken out of a business for the owner’s personal use

17. EXPENSE TRANSACTIONS EXPENSE TRANSACTIONS Assets = Liabilities Liabilities + Owner’s Equity Owner’s Equity Cash = $ 775 - 300 $ 200$3,520$ 5,645 +Supplies Prepaid Insurance + - 300 (expense) $ 350$ 5,345 - 40 $3,180$350$1,200$ 5,305 + A/R Oakdale School A/P Supply Depot + $ 350 $ 775 $1,200 $ 200 - 40 (expense) Total of left side: Total of right side: $350$1,200$ 775 +++ = $ 5,505 $ 200$ 5,305 + = Kim Park, Capital $ 3,220 $3,180

18. Assets = Liabilities Liabilities + Owner’s Equity Owner’s Equity Cash Kim Park, Capital= $ 775 + 200 $ 200$3,180$ 5,305 +Supplies Prepaid Insurance + - 200 $3,380 $150$ 5,305 - 125 $3,255$150$1,200$ 5,180 + A/R Oakdale School A/P Supply Depot + $350 $ 775 $1,200 $ 200 - 125 (withdrawal) Total of left side: Total of right side: $3,255$150$1,200$ 775 +++ = $5,380 $ 200$ 5,180 + = OTHER CASH TRANSACTIONS OTHER CASH TRANSACTIONS

19. End of Lesson REVIEW REVIEW WORK TOGETHER 1-3 Determining how transactions change an accounting equation Assets = Liabilities + Owner’s Equity Trans. No. 1. 2. 3. 4. + + + + - - +- 5. - - Cash Accts. Rec – Bowman Co. Supplies Prepaid Insurance Accts. Pay- Maxwell Co. Susan Sanders, Capital +++=+

20. What is GAAP? Standards and rules accountants follow while recording and reporting financial activities. Written by FASBStandards and rules accountants follow while recording and reporting financial activities. Written by FASB Why is it necessary?Why is it necessary? Users of financial statements rely on the information those statements contain.Users of financial statements rely on the information those statements contain. Consistent methods allow users to be confident of the information’s validity.Consistent methods allow users to be confident of the information’s validity. EXPLORE ACCOUNTINGEXPLORE ACCOUNTING ( )