Chapter 1 The Basics of Accounting

What is Accounting? Accounting Plan, record, analyze, interpret Accounting System Process of providing the information Accounting Records Organized summaries of a business’s financial activities Financial Statements Summarize conditions and operations *Accounting helps to better understand a business.

Who uses this? EVERYONE!! Businesses, employees, cashing checks and paying bills Type of business: Service business- Perform activity for a fee Business Entity Concept- Business’s financial information is recorded and reported separately from the owner’s personal financial information.

The Accounting Equation Assets = Liabilities + Owner’s Equity Shows the relationship between assets and liabilities and owner’s equity. Assets Something you own Liabilities Something you owe Equity Money that you owe to someone Owner’s Equity- amount remaining after liabilities is subtracted by assets