STARTING A PROPRIETORSHIP: CHANGES THAT AFFECT THE ACCOUNTING EQUATION Chapter 1 – Section 1.

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Presentation transcript:

STARTING A PROPRIETORSHIP: CHANGES THAT AFFECT THE ACCOUNTING EQUATION Chapter 1 – Section 1

The Accounting Equation What is Accounting? Accounting – Planning, recording, analyzing, and interpreting financial information.  A planned process to provide this information to management is an accounting system.  Organized summaries within the system are called accounting records.

Accounting is…… The language of business. Owners, managers, accountings personnel, use this knowledge to perform efficiently. What are financial statements? Who uses them? Why?

Techknow Consulting Service business = performs activity for $$$ Proprietorship = owned by 1 person Let’s look at Kim’s company …..  What is Business Entity?  Why is this concept important?  What are some of the benefits of being a sole proprietor, like Kim?

The Accounting Equation Asset = Anything of value  What do you have of value?  What can you do with assets? Equities = Financial rights to the assets  2 kinds  Liability – to whom money is owed  Owner’s Equity – belongs to the owner (duh )

What does the equation look like? Assets = Liabilities + Owner’s Equity Left sideRight Side $0=$0+$0