Ch. 1 What is Accounting?

1.1 Objectives The student will be able to… Describe the different user of Accounting information Prepare a networth statement and describe its purpose

General Info. Accounting is the language of business! Understanding accounting helps managers & owners make better business decisions. Failure to understand accounting info. can result in poor business decisions. Inaccurate accounting records often contribute to business failure and bankruptcy. ENRON!

Terms Accounting- Accounting Systems- Planning, recording, analyzing, and interpreting financial information. Accounting Systems- A planned process for providing financial information that will be useful to management

Terms Continued Net Worth Statement – Financial Statements – Financial reports that summarize the financial condition and operations of a business. Net Worth Statement – A formal report that shows what an individual owns, what an individual owes, and the difference between the two.

Key Terms Asset- Anything of value that is owned. They can be used to acquire other assets or be used to operate a business. For your note card: Cash Accounts Receivable Supplies Insurance Petty Cash

Key Terms Liability-(DEBT) Equities- (Owner’s Equity) An amount owed by a business (at a later date). Accounts Payable (on note card) House 180,000-50,000=130,000 Equities- (Owner’s Equity) (Financial rights to the assets of a business. Purchase price-payments made (equity)=Balance owed (debt)

The difference between personal assets and personal liabilities. Yes, More Terms Personal Net Worth The difference between personal assets and personal liabilities. Used in determining the financial position of the borrower (obtaining loans for homes, cars, etc.)

(the value of ownership) Yes, More Terms Owner’s Equity- (the value of ownership) The amount remaining after the value of all liabilities is subtracted from the value of all assets. Assets-Liabilities = Owner’s Equity

Final Terms for 1.1 Ethics – Business Ethics – The principles of right and wrong that guide and individual in making decisions. Business Ethics – The use of ethics in making business decisions.