What is Accounting Accounting is the Language of Business Accounting is the planning, recording, analyzing and interpreting of financial information Accounting records are organized summaries of a business’s financial activities. Accounting is the Language of Business

Ch 1-1 Vocabulary Proprietorship (sole Proprietorship) – a business owned by one person Asset – anything of value that is owned Equities – financial rights to the assets of a business Liability – amount owed by a small business Owner’s equity – equity of the owner – the amount remaining after the value of all liabilities is subtracted from the value of all assets

Encore Music The example business that teaches music lessons They rent office space and the instruments used to teach music lessons.

Accounting Concept: Business Entity A businesses financial information is recorded and reported separately from the owner’s personal financial information.

THE ACCOUNTING EQUATION The accounting equation must be in balance to be correct. The total of the amounts on the left side must always equal the total of the amounts on the right side. Lesson 1-1, page 7

Complete 1-1 Work Together and On Your Own

Vocabulary 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 is called an account. Account balance – the amount in an account Capital – The account used to summarize the owner‘s equity in a business

Unit of Measurement This concept is applied when business transactions are stated in numbers that have common values. Ex U.S. dollars, France Euros, Mexico Pesos

RECEIVING CASH Transaction 1 August 1. Received cash from owner on an investment, $10,000.00. Lesson 1-2, page 9

PAYING CASH Transaction 2 August 3. Paid cash for supplies, $1,577.00. Transaction 3 August 4. Paid cash for insurance, $1,200.00. Lesson 1-2, page 10

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. Lesson 1-2, page 11

Complete 1-2 Work Together and On Your Own

PREPARING A BALANCE SHEET 1. Write the heading. 2. Prepare the assets section. 1 3. Prepare the liabilities section. 2 3 4 4. Prepare the owner’s equity section. 6 5 7 8 5. Add amounts and compare the totals. 6. Rule single lines. 7. Write the totals. 8. Rule double lines. Lesson 1-3, page 14

Going Concern This concept is applied when financial statements are prepared with the expectation that a business will remain in operation indefinitely.

Complete 1-3 Work Together and On Your Own