1. Chapter 1 Accounting in Action

2. How Will Accounting Help Me? Used in Any Profession Used as a Career Choice Used for Personal Investments and Financial Decisions Used for College Credit Used as Your 4 th Year Math Class

3. Type of Accounting Jobs Accounting Clerk Banking Clerk Office Manager General Accountant Corporate Accountant Tax Accountant Auditor (Private and Government) IRS Forensic Accounting

4. What Do Accountants Do? Identify – What transaction occurred? Record – Classify the transaction Communicate – Prepare accounting reports

5. Ethics in Accounting Because of previous events Sarbanes-Oxley Act of 2002 (SOX) – Use of outside auditors – Responsibility of upper management

6. Standards in Accounting GAAP – Generally Accepted Accounting Principles FASB – Financial Accounting Standards Board SEC – Securities and Exchange Commission IASB - International Accounting Standards Board Monetary Unit Assumption – Record only transactions that can be expressed in money Economic Entity Assumption – Records of a company do not include personal data

7. Economic Entities Proprietorship – One Owner – Personally responsible for losses – Keep all profits – Only as long as the owner is alive Partnership – Two or more owners – Personally responsible Limited Liability partnership – Divide losses and profits

8. Basic Accounting Equation Assets = Liabilities + Owner’s Equity What a Company OWNS Cash Accts. Rec Buildings Vehicles Supplies Inventory What a company OWES Mortgage Loans Accts Pay Notes Ppay What a Company Is WORTH Assets – Liab Investments Revenue (Add) Earned Income Expenses (Subtract) Cost of doing business Drawings (Subtract) Owner takes money from their business

9. Transaction Analysis Assets = Liabilities + Owners Equity Analyze – What type of accounts were affected Evaluate/Compute – What is the amount that should be recorded Record – Double Entry Accounting: Amount recorded in at least two places Check – Is Accounting Equation still in balance??? Page 33 BE 1-5, BE 1-8

10. Pages 14-19 Read and Analyze Do E1-8 Page 37 Do Problems: Set A – P1-1A (Instruction A) – P1-2A (Instruction A)

11. Communicate Income Statement – Presents the revenues and expenses and resulting net income or loss for a period of time (month, quarter or year) Income – Expenses = Net Income or Loss If total income is more than total expenses, then you have a net income If total income is less than total expenses, then you have a net loss Let’s look at Page 21 ***Double Line means this is your final answer

12. Communicate Owner’s Equity Statement – Summarizes changes in owner’s equity for a specific period of time (month, quarter, year) – Let’s look at Page 21 Beginning Capital Add: Investments (if any were made) Add: Net Income (from Income Statement) Subtract (less) Drawings Subtract Net Loss = Owner’s equity at end of period

13. Communicate Balance Sheet – Reports the assets, liabilities and owner’s equity on a very specific date (end of month, end of quarter, end of year) – Let’s Look at Page 21 – Note: This is really the accounting equation in balance – Total Assets = Liabilities & O.E. New Capital comes from OE Statement ****Double Line means your final answer and you say everything is correct****

14. Communicate Statement of Cash Flow – Summarizes information about the cash inflows and outflows

15. Continue Problems Problem 1-4A (Instructions A,B,C)

16. Test Review Define: – Asset, Liability, Owner’s Equity – Revenue and Expenses Describe: – The Accounting Equation – The use of a double line in accounting – What is the role of an accountant Explain: – What are the Financial Statements and what does each summarize Analyze: – Problem similar to Problem 1-2A (Income State, Owner’s Equity Statement and Balance Sheet)