Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven 1- 1 This is the prescribed textbook for your course Available now at your campus bookstore!
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven 1- 2 Chapter 1 Accounting concepts
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven 1- 3 Objectives: Explain the accounting entity assumption. Define assets, liabilities, owner's equity, revenue and expenses and classify items into assets, liabilities, owner's equity, revenue and expenses. Define the accounting equation and describe the link between the equation and the accounting entity assumption. Analyse the effect of transactions on the accounting equation.
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven 1- 4 Accounting entity The entity assumption states that the business is a distinct accounting entity from the owner.
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven 1- 5 Assets Assets can be classified as items of value owned by the business or owed to the business. Some examples are: Cash Buildings Motor Vehicles.
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven 1- 6 Assets (continued) Current assets include: Cash Debtors/account receivable. Non-current assets include: Car Buildings Land.
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven 1- 7 Liabilities Liabilities are obligations or debts a firm must pay. Some examples are: Creditors Loans Bank overdrafts.
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven 1- 8 Liabilities (continued) Current liability – Accounts payable Non-current liability – Loans
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven 1- 9 Owners equity Owners equity records all dealings between the owner and the business. Capital is what the owner contributes to the business. Drawings are withdrawals of money or assets for personal use from the business.
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven Accounting equation Assets = Liabilities + Owners equity or Liabilities = Assets – Owners equity or Owners equity = Assets – Liabilities
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven Accounting equation (continued) The accounting equation: must always balance can be used to find an unknown variable ensures that the Statement of Financial Position balances.
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Accounting for Business – A non-accountant’s guide 2/e by Jopling, Lucas and Norton Slides prepared by Rick Nieuwenhoven Extended accounting equation A = L + [OE + (R – E)] A = Assets L = Liabilities OE = Owners Equity R = Revenue E = Expenses