1-1 A Starting Point: Statement of Financial Position.

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Presentation transcript:

1-1 A Starting Point: Statement of Financial Position

1-2 Assets Assets are economic resources that are owned by the business and are expected to benefit future operations.

1-3 Liabilities Liabilities are debts that represent negative future cash flows for the enterprise.

1-4 Owners’ Equity Owners’ equity represents the owners’ claims on the assets of the business.

1-5 The Accounting Equation Assets = Liabilities + Owners’ Equity $300,000 = $80,000 + $220,000 Assets = Liabilities + Owners’ Equity $300,000 = $80,000 + $220,000

McGraw-Hill/Irwin 1-6 Let’s analyze transactions for JJ’s Lawn Care Service.

2-7 On May 1, Jill Jones and her family invested $8,000 in JJ’s Lawn Care Service and received 800 shares of stock.

2-8 On May 2, JJ’s purchased a riding lawn mower for $2,500 cash.

2-9 On May 8, JJ’s purchased a $15,000 truck. JJ’s paid $2,000 down in cash and issued a note payable for the remaining $13,000.

2-10 On May 11, JJ’s purchased some repair parts for $300 on account.

2-11 Jill realized she had purchased more repair parts than needed. On May 18, JJ’s was able to sell half of the repair parts to ABC Lawns for $150, a price equal to JJ’s cost. JJ’s will receive the cash within 30 days.

2-12 On May 25, ABC Lawns pays JJ’s $75 as a partial settlement of its accounts receivable.

2-13 On May 28, JJ’s pays $150 of its accounts payable.

2-14 On May 29, JJ’s recorded lawn care services provided during May of $750. All clients were paid in cash.

2-15 On May 31, JJ’s purchased gasoline for the lawn mower and the truck for $50 cash.

2-16

1-17 Investments by and payments to the owners are not included on the Income Statement.

2-18 Now, let’s prepare the Balance Sheet for JJ’s Lawn Care Service for May 31, These balances will appear on the Balance Sheet.

1-19 Assets = Liabilities + Owners’ Equity $21,850 = $13,150 + $8,700 Assets = Liabilities + Owners’ Equity $21,850 = $13,150 + $8,700