Lesson 1-1 The Accounting Equation 5/1/2019 LESSON 1-1 The Accounting Equation Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School

In order to do this, you must have some type of What is Accounting? Planning, recording, analyzing, & interpreting financial information (also known as the language of business) In order to do this, you must have some type of LESSON 1-1

Accounting System A planned process for providing financial information that will be useful to management Consisting of LESSON 1-1

To organize summaries of a business’s financial activities Accounting Records To organize summaries of a business’s financial activities You will use these to create LESSON 1-1

Financial Statements Financial reports that summarize the financial condition and operations of a business LESSON 1-1

The Business – Techknow Consulting page 6 Business Entity – A business’s financial information is recorded and reported separately from the owner’s personal financial information. LESSON 1-1

The Business – Techknow Consulting page 6 A business that performs an activity for a fee Service Business Sole Proprietor-ship A business owned by one person LESSON 1-1

THE ACCOUNTING EQUATION Lesson 1-1 5/1/2019 THE ACCOUNTING EQUATION page 8 The Accounting Equation shows the relationship among assets, liabilities, & owner’s equity It is most often stated as: Assets = Liabilities + Owner’s Equity LESSON 1-1

THE ACCOUNTING EQUATION Lesson 1-1 5/1/2019 THE ACCOUNTING EQUATION page 8 Asset – anything of value that is owned by the business Liability – an amount owed by a business Equities – financial rights to the assets of a business Equity of those to whom money is owed Equity of the owner Owner’s Equity – the amount remaining after the value of all liabilities is subtracted from the value of all assets LESSON 1-1

THE ACCOUNTING EQUATION Lesson 1-1 5/1/2019 THE ACCOUNTING EQUATION page 8 LESSON 1-1

TERMS REVIEW accounting accounting system accounting records Lesson 1-1 5/1/2019 TERMS REVIEW page 9 accounting accounting system accounting records financial statements service business proprietorship asset equities liability owner’s equity accounting equation ethics business ethics LESSON 1-1