Chapter 1 – Starting a Proprietorship Accounting I Chapter 1 – Starting a Proprietorship

TERMS REVIEW accounting accounting system accounting records service business proprietorship asset equities liability owner’s equity accounting equation Lesson 1-1, page 8

TERMS REVIEW Accounting Planning, recording, analyzing, and interpreting financial information. Lesson 1-1, page 4

TERMS REVIEW Accounting System A planned process for providing financial information that will be useful to management. Lesson 1-1, page 4

TERMS REVIEW Accounting Records Organized summaries of a business’s financial activities. Lesson 1-1, page 4

TERMS REVIEW Service Business A business that performs an activity for a fee. Lesson 1-1, page 6

TERMS REVIEW Proprietorship A business owned by one person. Lesson 1-1, page 6

TERMS REVIEW Business Entity – Accounting Concept Keeping the financial information of the business separate from the personal finances of the owner. Lesson 1-1, page 6

TERMS REVIEW Asset Anything of value that is owned. Lesson 1-1, page 7

TERMS REVIEW Equities Financial rights to the assets of a business. Lesson 1-1, page 7

TERMS REVIEW Liability An amount owed by a business. Lesson 1-1, page 7

TERMS REVIEW Owner’s Equity The amount remaining after the value of all liabilities is subtracted from the value of all assets. Lesson 1-1, page 7

TERMS REVIEW Accounting Equation An equation showing the relationship among assets, liabilities, and owner’s equity. Lesson 1-1, page 7

THE ACCOUNTING EQUATION Lesson 1-1, page 7

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TERMS REVIEW transaction account account title account balance capital Lesson 1-2, page 12

TERMS REVIEW Transaction A business activity that changes assets, liabilities, or owner’s equity. Lesson 1-2, page 9

TERMS REVIEW Unit of Measurement - Concept Business transactions are stated in numbers that have common values (dollars) Lesson 1-2, page 9

TERMS REVIEW Account A record summarizing all the information pertaining to a single item in the accounting equation. Lesson 1-2, page 9

TERMS REVIEW Account Title The name given to an account. Lesson 1-2, page 9

TERMS REVIEW Account Balance The amount in an account. Lesson 1-2, page 9

TERMS REVIEW Capital The account used to summarize the owner’s equity in a business. Lesson 1-2, page 9

RECEIVING CASH Transaction 1 August 1. Received cash from owner an an investment, $10,000.00. Lesson 1-2, page 9

Transaction 2 August 3. Paid cash for supplies, $1,577.00. PAYING CASH Transaction 2 August 3. Paid cash for supplies, $1,577.00. Transaction 3 August 4. Paid cash for insurance, $1,200.00. Lesson 1-2, page 10

TRANSACTIONS ON ACCOUNT Transaction 4 August 7. Bought supplies on account from Ling Music Supplies, $2,720.00. Transaction 5 August 11. Paid cash on account to Ling Music Supplies, $1,360.00. Lesson 1-2, page 11

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TERMS REVIEW balance sheet Lesson 1-3, page 15

TERMS REVIEW Balance Sheet A financial statement that reports assets, liabilities, and owner’s equity. Lesson 1-3, page 13

TERMS REVIEW Going Concern - concept Financial statements are prepared with the expectation that the business will remain in business indefinitely. Lesson 1-3, page 13

PREPARING A BALANCE SHEET 1. Write the heading. 2. Prepare the assets section. 1 3. Prepare the liabilities section. 2 3 4 4. Prepare the owner’s equity section. 6 5 7 8 5. Add amounts and compare the totals. 6. Rule single lines. 7. Write the totals. 8. Rule double lines. Lesson 1-3, page 14

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