Opening Activity What do you OWN?What do you OWE? What I OWN – What I OWE = Personal Net Worth Would you consider selling any items you own?

Financial Position of an individual or company Cash equipment Furniture Automobile Building Credit card debt Suppliers Bank loan Mortgage

What is Accounting? Chapter 8

Accounting Process of recording, analyzing, and interpreting the economic activities of a business A record of all the MONEY coming IN and OUT

Examples of money flow Payment received by customers (debtors) –Pays for services –Pays for merchandise (goods) Payments made by business to other businesses (creditors) TRANSACTIONS –business activity involving money

Accounting is more than just recording how money is received and spent… Accounting records follow strict rules called General Accounting Principles (GAP) Using GAP presents financial information in a standard format in order to compare financial information

Why is accounting important to a business? Accountability (employees accountable; receipts, invoices, etc.) Budgeting (forecasting) Taxation (paying taxes on profit/earnings; capital gains) Prepare financial statement –Reports summarize business’ economic health to interested parties (stakeholders) Prepare annual reports –Summary of years activity about company achieved goals, new product launches, sales, expansions, etc.

Two types of accounting: Financial accounting –Recording company’s financial position –Financial position: financial status of a business with its owners and creditors Management accounting –Used within a company to make decisions –Ex. How much to charge for products?or Should the business expand?