Accounting 1 Chapter 1

Section 1 Learning Goal Students will begin to develop an appreciation of the significance of accounting to both businesses and people Students will also be able to complete a “Net Worth” Statement

Accounting Planning, recording, analyzing, financial information.

Why is accounting information important?

Is accounting relevant only to businesses?

Net Worth Statement A formal report that shows what an individual owns, what an individual owes, and the difference between the two.

Assets Anything of value owned Examples:

Liabilities An amount owed .

Equity The remaining claim to the assets after liabilities are settled Total Assets – Total Liabilities

Review In a short paragraph, define accounting and describe a scenario in which you, as a non-accountant, might use accounting. On the same document, create a Net Worth Statement for yourself estimating or using the internet to research the value of things you own (include only individual assets worth at least $100). Assume you owe me $500. Save this as Assignment 2 in your turn in folder Complete “on your own” 1-1

Section 2 Learning Goal Students will become familiar with the accounting equation and will be able to show how transactions effect the equation

Service Business A business that performs an activity for a fee. They provide something that is not tangible. Examples include: Legal services, medical services, accounting services, landscaping services, etc.

Proprietorship A business owned by one person. Also called “sole proprietorships”.

Business Entity Concept A business is treated as its own entity. Financial records of the business should be kept separate from the owners personal financial information.

Accounting Equation Assets = Equities Assets = Liabilities + Owner’s Equity

Owner’s Equity The owner’s claim to the assets of a business What is left after the value of liabilities is subtracted from the assets of a business. Assets – Liabilities = Owner’s Equity

Transaction An activity that changes assets, liabilities or owner’s equity. The business entity concept requires that personal transactions of the owner be kept separate from transactions of the business.

Unit of Measurement Concept A principle that all business transactions should be expressed in a common unit of measure.

Account A record pertaining to a single item in the accounting equation. A record for a particular asset, liability or owner’s equity.

Transactions Received cash from owner as an investment, $10, 000 Paid cash for supplies, $2000 Paid cash for insurance, $1200 Bought supplies on account from Ling Music Supplies, $2700 Paid cash on account to Ling Music Supplies, $1300.

Goal for Today Student will learn how to account for transactions that change owner’s equity

New Terms Revenue Expense Withdrawal

Transactions Received cash from sales, $1100 Sold services on account to Joe Smith, $500 Paid cash for communication bill, $80 Paid cash for equipment rental, $400 Received cash on account from Joe Smith, $200

Balance Sheet A financial statement reporting the assets, liabilities and owner’s equity on a specific date.

Join APLIA You will need to create an account The link to do so is on the Accounting page of my web site Please use your school email to create the account Use the access code I provide you for payment Enter class : Accounting 1 – Fall 2016