Lesson 1-1 The Accounting Equation 8/3/2018 LESSON 1-1 The Accounting Equation

THE ACCOUNTING EQUATION Lesson 1-1 8/3/2018 THE ACCOUNTING EQUATION page 8 LESSON 1-1

TERMS REVIEW Liability – an amount owed by a business page 9 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 Ethics – the principles of right and wrong that guide an individual in making g decisions Accounting - planning, recording, analyzing, and interpreting financial information accounting system – a planned process for providing financial information that will be useful to management Equities – financial rights to the assets of a business LESSON 1-1

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 Proprietorship – a business owned by one person Asset – anything of value that is owned business ethics – the use of ethics in making business decisions LESSON 1-1

LESSON 1-2 How Business Activities Change the Accounting Equation 8/3/2018 LESSON 1-2 How Business Activities Change the Accounting Equation

RECEIVING CASH page 10 Transaction 1 August 1. Received cash from owner as an investment, $5,000.00. LESSON 1-2

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

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 1-2

TERMS REVIEW page 13 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 an business LESSON 1-2