How can values be expressed in multiple ways? Unit Pricing Accounting Week 1 What basic math skills are necessary for success in accounting and finance? How does one determine the appropriate mathematical to use for various business situation? How can values be expressed in multiple ways? How does one calculate the total amount due for a loan or a purchase? What is Accounting? What is the Accounting Equation?

The Accounting Equation

Doesn’t have to be paid off, could still be making payments Assets Liabilities Owner’s Equity Items OWNED by a business that will provide future benefits. Probable future outflow of assets as a result of a past transaction or even. Amount by which the business assets exceed the business liabilities. Doesn’t have to be paid off, could still be making payments In other words, debts or obligations of the business that can be paid with cash, goods, or services “Net Worth” or “Capital” CASH MERCHANDISE FURNITURE FIXTURES MACHINERY BUILDINGS LAND Accounts Receivable Once the debts are paid, the remaining assets belong to the owner (Owner’s Equity). NOTES PAYABLE ACCOUNTS PAYABLE

ANALYZING BUSINESS TRANSACTIONS THREE QUESTIONS: What Happened? Which accounts are affected? How is the Accounting Equation affected?

Purchased office supplies for $800 Let’s Analyze Mary Adams Consulting PURCHASED OFFICE SUPPLIES FOR $800 CASH Question #1: What Happened? Question #2: Identify Accounts that are Affected/Classify the Accounts Question #3: Determine whether the accounts have increased or decreased. #3 Office Supplies Cash Increased Decreased #1 Purchased office supplies for $800 #2 Office Supplies & Cash Assets Assets

Let’s look at the accounting Equation + ASSETS LIAB. = O. E. + CASH OFF. SUPPLIES = + +$800 -$800 = Right hand side of equation is not affected

RECEIVING CASH Transaction 1 August 1. Received cash from owner as an investment, $10,000.00.

PAYING CASH Transaction 2 August 3. Paid cash for supplies, $1,577.00. Transaction 3 August 4. Paid cash for insurance, $1,200.00.

TRANSACTIONS ON ACCOUNT Transaction 4 August 7. Bought supplies on account from Ling Music Supplies, $2,720.00. Transaction 5 August 11. Paid cash on account to Ling Music Supplies, $1,360.00.