Chapter 1 Starting a Proprietorship

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Starting a Proprietorship

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Presentation transcript:

Chapter 1 Starting a Proprietorship

What is Accounting? Planning, recording, analyzing, and interpreting financial information. Language of business Poor accounting may lead to business failure, loss of money, bankruptcy, and legal problems.

1-1 The Accounting Equation

THE ACCOUNTING EQUATION Lesson 1-1, page 7

Assets Anything of value that is owned by a business. Can be used to acquire other assets or be used to operate a business. Example- Encore Music will use cash to buy supplies for the business What are some other types of assets?

Equities Financial rights to the assets of a business. Two types of equities…. Equity to whom money is owed (Liability) Equity of the owner (Owner’s Equity) What are liabilities you or people in your family might have?

ALOE Accounting Equation An equation showing the relationship among assets, liabilities, and owner’s equity. The accounting equation must be in balance to be correct. Assets = Liabilities + Owner’s Equity A = L + OE ALOE

TERMS REVIEW accounting accounting system accounting records service business proprietorship asset equities liability owner’s equity accounting equation Lesson 1-1, page 8

Audit Your Understanding (p8) What is accounting? Give two examples of service businesses. What is a proprietorship? State the accounting equation.