Written by Ruby Ann Sawyer, Brantley County Middle School

the system of recording and summarizing financial transactions and analyzing, verifying, and reporting the results

Everyone! Businesses use accounting information to run the business. Investors use it to make decisions about whether to buy a company’s stocks. Creditors use it to make decisions about whether to loan money to a company. IRS use it to determine how much taxes the company must pay. Customers use the information to determine which company to purchase products or services from (you want a company that is going to be around in the future).

Assets – things you own Liabilities – a debt or obligation (money owed) Owner’s Equity – the amount of the initial investment plus retained earnings. Income – a monetary gain (usually from the sale of products or services) Expenses – financial burdens; cost

Assets Liabilities Owner’s Equity Income Expenses

Credit – An entry on the right side of an account – decreases assets or increases liabilities. Debit – An entry on the left side of an account – increases assets or decreases liabilities.

Assets Liabilities Income Expenses

What are some of your own assets? What are some of you own liabilities? What are some of your own incomes? What are some of your own expenses?

Credit – the entry on the right side of an account Account Name CreditDebit Debit – the entry on the left side of an account

Asset Account In this example, your parents gave you $150 cash and you spend $100 on clothes. Asset Account Credit Decreases Debit Increases Type of Account

Asset Account What is the balance of your cash account? $100$150 Cash In this example, your parents gave you $150 cash and you spend $100 on clothes. $50 Asset Account Credit Decreases Debit Increases Type of Account

Balance Sheet - An official financial statement that includes the company’s assets and liabilities. It determines the value of the company by subtracting liabilities from assets. Income Statement - A financial statement of a company’s operation. Shows a company’s income, expenses, and income for a period of time. Shows the company’s profit or loss for a given period of time.

What are debits? credits? What are the basic account types? What is an Income Statement? What is a Balance Sheet? Let’s get started!

An official financial statement that includes the company’s assets and liabilities. It determines the value of the company by subtracting liabilities from assets.

(Company Name) Balance Sheet December 31, 20-- ASSETSLIABILITIES Cash$10,000Accounts payable$15,000 Inventory20,000Mortgage (Property & Equipment)125,000 Equipment, Furniture, Fixtures75,000Interest Payable15,000 Property100,000Owner's Equity Capital stock$50,000 TOTAL ASSETS205,000TOTAL LIABILITIES & EQUITY205,000 Instructions: Create the above spreadsheet. Enter formulas for Total cells. Title in font Arial size 16. Everything else in font Arial size 10 Merge and Center the three title lines. Bold headings and totals. Format for currency.

Open Excel. Save the document as “Sample Balance Sheet” Create the sample balance sheet exactly as you see it on your handout. Don’t forget to save frequently.

A financial statement of a company’s operation. Shows a company’s income, expenses, and income for a period of time. Shows the company’s profit or loss for a given period of time.

(Company Name) Income Statement For Month Ended December 31, 20-- Income Sales$10,000 Interest Income50 Total Income$10,050 Expenses Advertising$700 Bank Charges50 Charitable Contributions100 Insurance750 Miscellaneous50 Office Expense75 Rent1000 Repairs and Maintenance250 Supplies750 Telephone45 Utilities550 Wages4000 Total Expenses$8,320 Net Income (Loss)$1,730 Instructions Create the above spreadsheet Merge and Center the three title lines. Bold the title lines and change font to size 16. Bold headings and total lines. Add bottom border for Total Income and Total Expenses. Add double bottom border for Net Income (Loss). Add the appropriate formulas for Total Income, Total Expenses, and Net Income (Loss). Formulas Total Income = Sales + Interest Income Total Expenses = all expenses Net Income (Loss) = Total Income - Total Expenses

Open Excel. Save the document as “Sample Income Statement.” Create the sample balance sheet exactly as you see it on your handout. Don’t forget to save frequently.

Select the appropriate financial statement (Balance Sheet or Income Statement) for each accounting classification. Assets_______________ Expenses______________ Income_______________ Liabilities______________ Owner’s Equity _________

Accounts Payable_________________________ Accounts Receivable_________________________ Cash_________________________ Furniture & Fixtures_________________________ Inventory_________________________ Line of Credit_________________________ Mortgage_________________________ Supplies_________________________

Advertising_________________________ Interest Income_________________________ Rent_________________________ Repairs_________________________ Salaries_________________________ Sales_________________________ Utilities_________________________