The Accounting Equation n Property: anything of value that is owned –cash and supplies to conduct daily business –can be used to acquire other assets (supplies) or to operate business n Financial Claims : rights or claims to property n Property = Financial Claims (who owns it?)
The Accounting Equation n Property = Assets: anything of value that is owned –cash and supplies to conduct daily business –can be used to acquire other assets (supplies) or to operate business n Financial Claims = Equities: financial rights or claims to the assets of a business n Assets = Equities
The Accounting Equation n Assets: anything of value that is owned –cash and supplies to conduct daily business –can be used to acquire other assets (supplies) or to operate business n Equities: financial rights or claims to the assets of a business n Assets = Equities
The Accounting Equation n Assets = Equities $600 Assets$600 Equities
The Accounting Equation n Assets = Equities $600 Assets$600 Equities
The Accounting Equation n Assets = Equities $100 Assets $60 Equities$40 Equities
The Accounting Equation 2 Types of Equities: n Liabilities: amount owed by a business –Equity of those to whom money is owed. n Owner’s equity - amount remaining after value of all liabilities is subtracted from value of all assets –Equity of the owner
The Accounting Equation n Assets = Equities $100 Assets $60 Owner’s Equity $40 Liabilities
The Accounting Equation n Assets = Equities $100 Assets $60 Owner’s Equity$40 Liabilities $100 Assets = $40 Liabilities + $60 Owner’s Equity
The Accounting Equation: n Assets = Liabilities + Owner’s Equity (OE) I Owe You Billing Assets - Liabilities = Owner’s Equity (OE)
THE ACCOUNTING EQUATION n The Equation must ALWAYS be in balance!!! Lesson 1-1, page 7
T ERMS REVIEW accounting accounting system accounting records service business proprietorship Lesson 1-1, page 8 asset equities liability owner’s equity accounting equation
1-1 WORK TOGETHER, p.8 3,0008,000 10,0006,000 63,00035,000 70,00022,000 50,00058,000 17,5002,250 40,25014, ,00023,456 10,00012,000 ASSETS = LIABILITIES + OWNER’S EQUITY
1-1 WORK TOGETHER, p.8 11,0003,0008,000 10,0004,0006,000 63,00035,00028,000 70,00022,00048, ,00050,00058,000 17,5002,25015,250 40,25026,00014, ,00023,45676,544 22,00010,00012,000 ASSETS = LIABILITIES + OWNER’S EQUITY
1-1 WORK TOGETHER, p.8 23,00013,000 70,00030,000 48,00025,000 55,00010, ,000618,000 5,5001,250 64,00038,000 88,00029,000 90,000 45,750 ASSETS = LIABILITIES + OWNER’S EQUITY
1-1 WORK TOGETHER, p.8 23,00010,00013, ,00070,00030,000 48,00025,00023,000 55,00044,50010,500 1,030,000412,000618,000 5,5001,2504,250 64,00026,00038, ,00088,00029,000 90,000 45,750 ASSETS = LIABILITIES + OWNER’S EQUITY