What is Accounting  Accounting is Planning, Recording, Analyzing and Interpreting financial information  A planned process for providing financial information that will be useful to management is called an accounting system.

What is Accounting  Organized summarized of a business’s financial activities are called accounting records.  Financial reports that summarize the financial condition and operations of a business are called financial statements.

What is Accounting  Accounting is the language of business!  Inaccurate business records often lead to business failure and bankruptcy

Types of Businesses  Service Business  Performs an activity for a fee  MAKE A LIST OF SOME SERVICE BUSINESSES IN BRANDON  A Business owned by one person is a proprietorship  Owners must keep business and personal records separate (Concept: Business Entity)  What are some advantages/disadvantages for a business to organize as a proprietorship? (Blue Box, page 7)

Accounting for a Proprietorship The Accounting Equation **IT’S ALL ABOUT BALANCE**

The Accounting Equation  Assets are anything of value that is owned.  Equities are the financial rights to the assets of the business. There are two types:  (1) Equity of those to whom money is owed  (2) Equity of the owner  A liability is an amount owed by a business  Owner’s Equity is the amount remaining after all the liabilities have been subtracted from the assets.

The Accounting Equation Assets = Liabilities + Owner’s Equity  The left side must always equal the total amounts on the right side.  Before a business starts, it’s accounting equation would show all zeros.

ETHICS  Ethics are the principals of right and wrong that guide people into make decisions.  Business Ethics is simply the use of ethics in making business decisions.

Lesson 2 Words to Know 1.Transaction 2.Account 3.Account title 4.Account balance 5.Capital

The Accounting Equation  Set up in a chart (sometimes called a T Chart) Assets = Liabilities + Owner’s Equity $11,000 3,000 8,000 10,000 ? 6,000 63,000 35,000 ? ? 60,000 20,000

Working Together 1-2 Trans No. Assets = Liabilities + Owner’s Equity

Review so far…  What is an asset? A liability? A transaction?  If you RECEIVE cash, it’s a………  If you PAID cash, it’s a …….  Supplies & Prepaid Insurance are ____________  Buying Supplies on Account (you charged it)  Listed as an ACCOUNT PAYABLE under LIABILITY (it’s a bill)  When you make a payment on that account, the cash _______ AND then Account Payable also ____________.

Lesson 3 Words to Know 1.Revenue – an increase in owner’s equity from the result in the operation of the business (a sale) 2.Sale on account – a sale in which cash will be received at a later date (you charged them ) 3.Expense – decrease in owner’s equity resulting from the operation of a business (you pay a bill) 4.Withdrawal – assets taken from the business for the owner’s personal use (usually taken from cash, also subtracted from owner’s equity)

Revenue Transactions

Expense Transactions

Other Cash Transactions

Lesson 3 Points…  A withdrawal is NOT considered an expense because it’s not a result from an operation of the business.  Expenses are BILLS such as rent, utilities, etc.  Cash received on account (someone pays on their bill), the assets affected are CASH and ACCOUNTS RECEIVABLE!  REMEMBER TO BALANCE BOTH SIDE AFTER EVERY 2/3 TRANSACTIONS  If both sides are not equal, go back and double check your transactions