Starting a Proprietorship: Changes That Affect the Accounting Equation

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Starting a Proprietorship: Changes That Affect the Accounting Equation Lesson 1-1 4/19/2017 Chapter 1 Starting a Proprietorship: Changes That Affect the Accounting Equation Identify service businesses. Analyze sole proprietorship with the advantages and disadvantages. State the Accounting Equation.

Competency: Understanding the Accounting Cycle for a Service Business Objectives: 34 Describe the purpose of accounting and the role it plays in the global economy. 35 Demonstrate the effects of transactions on the accounting equation. LESSON 1-1

Chapter 1 Objectives Define accounting terms related to starting a service business organized as a proprietorship and to changes that affect the accounting equation. Identify accounting concepts and practices related to starting a service business organized as a proprietorship and to changes that affect the accounting equation. Classify accounts as assets, liabilities, or owner’s equity and demonstrate their relationships in the accounting equation. Analyze how transactions affect accounts in an accounting equation. LESSON 1-1

What is Accounting? Accounting – planning, recording, analyzing, and interpreting financial information. Accounting system – a planned process for providing financial information that will be useful to management. 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

Service business – a business that performs an activity for a fee. Proprietorship/Sole Proprietorship – a business owned by one person. LESSON 1-1

BUSINESS STRUCTURES Forming and Dissolving a Proprietorship Advantages Disadvantages Ease of formation. Total control by the owner. Profits that are not shared. Limited resources. Unlimited liability. Limited expertise. Limited life. Obligation to follow the laws of both the federal government and the state and city in which the business is formed. LESSON 1-1

Asset – anything of value that is owned. Equities – Financial rights to the assets of a business. Liability – an amount owed by a business. Owner’s Equity/Capital – the amount remaining after the value of all liabilities is subtracted from the value of all assets. Accounting Equation – shows the relationship among assets, liabilities, and owner’s equity. LESSON 1-1

THE ACCOUNTING EQUATION Lesson 1-1 4/19/2017 THE ACCOUNTING EQUATION page 8 LESSON 1-1

DEFINE TERMS REVIEW In a Word Document. SaveAS: Chapter1TermsYourName page 9 In a Word Document. SaveAS: Chapter1TermsYourName accounting accounting system accounting records financial statements service business proprietorship asset equities liability owner’s equity accounting equation ethics business ethics LESSON 1-1

Exit Ticket for Chapter 1-1 In a Word Document, SaveAS: Chapter1-1AYUYourName Drop a copy in my InBox today before you leave! What is accounting? Give two examples of service businesses. What is a proprietorship and explain advantages and disadvantages? State the accounting equation. LESSON 1-1

Chapter 1-1 Assignments Complete on Aplia Work Together 1-1 On Your Own 1-1 Application Problem 1-1 LESSON 1-1