OBJECTIVES Define Accounting, service business and proprietorship Advantages and disadvantages of accounting Understand Assets, liabilities and owner’s equity State the accounting equation LESSON 1-1

LESSON 1-1 What is Accounting ? 4/15/2017 LESSON 1-1 What is Accounting ? Accounting: (Definition) planning, recording, analyzing, and interpreting financial information Language of Business

LESSON 1-1 Advantages Helps managers make better business decisions 4/15/2017 LESSON 1-1 Advantages Helps managers make better business decisions Controls spending Inaccurate accounting records can lead to business failure and bankruptcy Failure to understand accounting can result in poor business decisions Disadvantages

Accounting Terms accounting: planning, recording, analyzing, and interpreting financial information accounting system: a planned process for providing financial information that will be useful to management (for making decisions) accounting records: organized summaries of a business’s financial activities financial statements: financial reports that summarize the financial condition and operations of a business LESSON 1-1

Chapters 1 – 8 In Chapter 1 – 8 sample in PowerPoints are: Accounting records for a proprietorship Accounting records for a service business Company Name is: Techknow Consulting Service provided: help setup and troubleshoot computer networks LESSON 1-1

Types of Businesses Service business: a business that performs an activity for a fee installing a network not a tangible product - (can’t necessarily touch or feel it or carry it away) example: hair cut

Business Structures What is a proprietorship? proprietorship: a business owned by one person Note: owner’s must keep personal accounting records separate from business records Illegal not to LESSON 1-1

Notebook Assignment Lesson 1-1 Assignment #1 Let’s review the pros and cons of a proprietorship On page 7 of your textbook, read Business Structures On page 5 of your Working papers, respond to 4 items: Number 1 & 2: answer 1 & 2 from page 7 after the reading Number 3: List one advantage of a proprietorship that you feel is the most important and why? Number 4: List two of the disadvantages of a proprietorship that you feel could prevent you from opening your own business and why? Number 5: Of the disadvantages, which two would be the easiest to overcome and how would you do it? LESSON 1-1

Business Structures What are three advantages? Ease of formation, total control, non-shared profits What are the disadvantages? Limited resources Unlimited liability Limited expertise Limited life Must follow both federal and state laws LESSON 1-1

The Accounting Equation Two primary components in Accounting: Asset: anything of value that is owned What are some things a business may own? Equities: financial rights to the assets of a business What you owe What you have left if you subtract what you owe from what you own What are some types of owner’s equity? LESSON 1-1

The Accounting Equation Equities: financial rights to the assets of a business Two Types: liability: an amount owed by a business Those whom money is owed to You charged products to pay later, or you buy stocks, bonds etc, to fund your business When you charge something you still have to pay it owner’s equity: The amount remaining after the you subtract the value of liabilities from the value of assets LESSON 1-1

If you have a computer and an XBOX with a combined value of $850 and you owe $250 on the computer, how much is your owner’s equity? Equities Assets Liabilities Owner’s Equity LESSON 1-1

Lesson 1-1 4/15/2017 Accounting Equation Accounting Equation: the relationship among assets, liabilities, and owner’s equity is written as an equation: Written as: Assets = Liabilities + Owner’s Equity

Assets = Liabilities + Owner’s Equity Lesson 1-1 4/15/2017 Accounting Equation Characteristics of the equation: Assets and Equities must be equal Can be written in a T-Account form: Assets on the left, equities on the right Total on the left will always = the total on the right Assets = Liabilities + Owner’s Equity

THE ACCOUNTING EQUATION Lesson 1-1 4/15/2017 THE ACCOUNTING EQUATION LESSON 1-1

The Accounting Equation Assets and Equities must be equal Total on the left will always = the total on the right If Assets are $5000 and liability is $1000, what is Owner’s Equity? LESSON 1-1

Example 1.1 Assets = 14,000 Liabilities = 2,000 Liabilities + Owner’s Equity 1. ? 4,000 10,000 2. 10,000 ? 8,000 3. 60,000 38,000 ? Assets = 14,000 Liabilities = 2,000 Owner’s Equity = $22,000 LESSON 1-1

Ethical Decision Making page 9 ethics: the principles of right and wrong that guide an individual in making decisions business ethics: the use of ethics in making business decisions LESSON 1-1

TERMS REVIEW accounting accounting system accounting records financial statements service business proprietorship asset equities liability owner’s equity accounting equation ethics business ethics LESSON 1-1

Notebook Assignment Lesson 1-1 Assignment 2 4/15/2017 Notebook Assignment Lesson 1-1 Assignment 2 Number 1: What is the accounting equation Number 2: Draw a “T Account”: Put accounting equation elements on the correct side. Number 3: What are two examples of a service business? Number 4: What is a proprietorship? Assets = Liabilities + Owner’s Equity

Assignment: Work Together 1-1 On Your Own 1-1 Application 1-1 LESSON 1-1