Lesson 1-1 What is Accounting? The Accounting Equation 6/26/2018 LESSON 1-1 What is Accounting? The Accounting Equation

What is Accounting? Planning, recording, analyzing and interpreting financial information is called accounting. A planned process for providing financial information that will be useful to management is called an accounting system. Organized summaries of a business’s financial activities are called accounting records. LESSON 1-1

What is Accounting Financial reports that summarize the financial condition and operations of a business are called financial statements Are used to make financial decisions Inaccurate accounting records often contribute to business failure and bankruptcy LESSON 1-1

Types of Business Service Business: a business that performs an activity for a fee Examples Dentist Construction Business Hair Salon Proprietorship: a business owned by one person Often referred to as a sole proprietorship LESSON 1-1

All About Assets Anything of value that is owned is an asset Assets have value because they can be used to acquire other assets or to operate a business Examples: Cash Supplies LESSON 1-1

All About Equities and Liabilities Equities are financial rights to the assets of a business Two Types Equity of those to whom money is owed Buy supplies and agree to pay for at later date Equity of the owner Owner has right to make decisions how assets will be used LESSON 1-1

All About Equity and Liabilities An amount owed by a business is called a liability Owner’s equity: the amount remaining after the value of all liabilities is subtracted from the value of all assets LESSON 1-1

A Bit About Ethics Ethics: The principles of right and wrong that guide an individual in making decisions The use of ethics in making business decisions is called business ethics LESSON 1-1

THE ACCOUNTING EQUATION Lesson 1-1 6/26/2018 THE ACCOUNTING EQUATION page 8 LESSON 1-1

The Accounting Equation The Accounting Equation MUST be in balance! The total amount on the left side must always equal the total of the amounts on the right side! LESSON 1-1

TERMS REVIEW accounting accounting system accounting records page 9 accounting accounting system accounting records financial statements service business proprietorship asset equities liability owner’s equity accounting equation ethics business ethics LESSON 1-1

Review Section 1-1 Workbook Page 5 Page 6 LESSON 1-1