Lesson 1-1 6/26/2018 “We are what we repeatedly do. Excellence, then, is not an act, but a habit.” --Aristotle LESSON 1-1

The Language of Business Lesson 1-1: The Accounting Equation 6/26/2018 Chapter 1 Starting a Proprietorship: Changes that Affect the Accounting Equation Accounting: The Language of Business Lesson 1-1: The Accounting Equation Assignment: Read pp 5-7 Objectives: 1. Define accounting terms related to starting a service business organized as a proprietorship and to changes that affect the accounting equation Identify accounting concepts and practices related to starting a service business organized as a proprietorship and to changes that affect the accounting equation Classify accounts as assets, liabilities, or owner’s equity and demonstrate their relationships Analyze how transactions affect accounts in an accounting equation

Terms Accounting Accounting system Accounting records Lesson 1-1 6/26/2018 Terms pages 6-7 Accounting Accounting system Accounting records Financial statements Service Business Proprietorship Business Entity-- (GAAP concepts in purple) Terms: Accounting—planning, recording, analyzing, and interpreting financial information Accounting System—planned process for providing financial information that will be useful to management Accounting Records—organized summaries of a business’s financial activities Financial Statements—financial reports that summarize the financial condition and operations of a business Service Business—a business that performs an activity for a fee—The business in our first section of Accounting is called “Techknow Consulting” and it provides network troubleshooting for customers. Proprietorship—a business owned by one person (aka sole proprietorship) DISCUSS P 7—ANSWER QUESTIONS ABOUT PROPRIETORSHIPS ON Study Guide 1 p.3. (at bottom) Points for response as well as study guide Business Entity—when the financial information for a business is recorded and reported SEPARATELY from the owner’s personal financial information LESSON 1-1

THE ACCOUNTING EQUATION Lesson 1-1 6/26/2018 THE ACCOUNTING EQUATION Page 8 Asset Equities: Equity of those to whom money is owed Equity of the owner (aka “owner’s equity”) Liability Owner’s Equity All of Accounting is based on the accounting equation: memorize it and it will help you right through college accounting! Asset: Anything of value that is owned Equities: Financial rights to the assets of a business Equity of those to whom money is owed Equity of the owner Liability: An amount owed by a business Owner’s Equity: The amount remaining after the value of all liabilities is subtracted from the value of all assets Accounting Equation: An equation showing the relationship among assets, liabilities, and owner’s equity Do: Work together: p 9 text Working papers: p 5 LESSON 1-1

TERMS REVIEW Review website accounting accounting system Lesson 1-1 6/26/2018 TERMS REVIEW page 9 accounting accounting system accounting records financial statements service business proprietorship asset equities liability owner’s equity accounting equation ethics business ethics Review website You will need to know ALL of the Chapter 1 terms for our Chapter 1 exam. To help you review/study, we will be completing a study guide, and there are online resources for you to use to study. Here’s the website: http://accountingxtra.swlearning.com/multicolumn/xtra/ch01_xtra.html Ethics: the principles of right and wrong that guide an individual in making decisions Business Ethics: the use of ethics in making business decisions DO: Application Prob. 1-1 Text: p 19 Working Papers: p11 LESSON 1-1

How Business Activities Change the Accounting Equation Lesson 1-1 6/26/2018 LESSON 1-2 How Business Activities Change the Accounting Equation Terms: Transaction Account Account Title Account Balance Capital Unit of Measurement US=Dollars, Japan=Yen China=Yuan, France=Euro Transaction: a business activity that changes assets, liabilities, or owner’s equity Account: a record summarizing all the information pertaining to a single item in the accounting equation Account title: the name given to an account Account balance: the amount in an account Capital: the account used to summarize the owner’s equity in a business (in this case, Kim Park, Capital) Unit of Measurement: this concept is applied when business transactions are stated in numbers that have common values LESSON 1-1

Lesson 1-1 6/26/2018 RECEIVING CASH page 10 Transaction 1 August 1. Received cash from owner as an investment, $5,000.00. LESSON 1-1

PAYING CASH Transaction 2 August 3. Paid cash for supplies, $275.00. Lesson 1-1 6/26/2018 PAYING CASH page 11 Transaction 2 August 3. Paid cash for supplies, $275.00. Transaction 3 August 4. Paid cash for insurance, $1,200.00. LESSON 1-1

TRANSACTIONS ON ACCOUNT Lesson 1-1 6/26/2018 TRANSACTIONS ON ACCOUNT page 12 Transaction 4 August 7. Bought supplies on account from Supply Depot, $500.00. Transaction 5 August 11. Paid cash on account to Supply Depot, $300.00. LESSON 1-1

CHECK-OFF FOR CLASS PARTICIPATION Lesson 1-1 Guided Practice 6/26/2018 DO: Work together 1-2: Text p 13. Working papers p 7 OYO 1-2: Text p 13. Working papers p 8 Application problem 1-2: Text p 13. Working papers p 12 CHECK-OFF FOR CLASS PARTICIPATION LESSON 1-1

How Transactions Change Owner’s Equity in an Accounting Equation Lesson 1-1 6/26/2018 LESSON 1-3 How Transactions Change Owner’s Equity in an Accounting Equation Terms: Revenue Sale on Account: aka: “charge sale” Expense Withdrawals Revenue: An increase in owner’s equity resulting from the operation of a business Sale on Account: a sale for which cash will be received at a later date. Also known as a charge sale (different from VISA or MC) Expense: a decrease in owner’s equity resulting from the operation of a business

Lesson 1-1 6/26/2018 REVENUE TRANSACTIONS page 14 Transaction 6 August 12. Received cash from sales, $295.00. Transaction 7 August 12. Sold services on account to Oakdale School, $350.00. LESSON 1-1

Lesson 1-1 6/26/2018 EXPENSE TRANSACTIONS page 15 Transaction 8 August 12. Paid cash for rent, $300.00. Transaction 9 August 12. Paid cash for telephone bill, $40.00. LESSON 1-1

OTHER CASH TRANSACTIONS Lesson 1-1 6/26/2018 OTHER CASH TRANSACTIONS page 16 Transaction 10 August 12. Received cash on account from Oakdale School, $200.00. Transaction 11 August 12. Paid cash to owner for personal use, $125.00. LESSON 1-1

Guided Practice and Chapter Assignment Lesson 1-1 6/26/2018 Guided Practice and Chapter Assignment Do: Work together 1-3: text p 17 Working papers p 9 OYO 1-3: text p 17, working papers p10 Application problem 1-3; text p 20, working papers p 13 Graded assignments for Chapter 1: Mastery Problem 1-4: text p 21, working papers p 14 Study Guide Ch 1: correct in class Chapter 1 test: 125 points: terms, T-F, 2 probs. LESSON 1-1