1. Lesson 1-1 The Accounting Equation
5/10/2018
LESSON 1-1
The Accounting Equation

2. Accounting Overview What is Accounting? What is an Accounting system?
Lesson 1-1
5/10/2018
Accounting Overview
What is Accounting?
What is an Accounting system?
What are Accounting Records?
What is the “language of business”?
Financial Reports?
Accounting is planning, recording, analyzing, and interpreting financial information.
Accounting system is a planned process for providing financial informaiton that will be useful to management.
Accounting Records are organized summaries of a business’s financial activites
Language of business - Accounting
Financial Reports - include things such a balance sheets,
LESSON 1-1

3. Accounting Overview Service Business? Business owned by one person?
Lesson 1-1
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Accounting Overview
Service Business?
Business owned by one person?
Service Business - performs an activity for a fee
Proprietorship -
LESSON 1-1

4. Sole Proprietorship Advantages? Disadvantages? LESSON 1-1 Lesson 1-1
5/10/2018
Sole Proprietorship
Advantages?
Disadvantages?
Advantages - owner retains total control of the company; ability to make own decisions
Disadvantages - personally responsible for the debts
LESSON 1-1

5. THE ACCOUNTING EQUATION
Lesson 1-1
5/10/2018
THE ACCOUNTING EQUATION
page 8
LESSON 1-1

6. Basic Accounting Equation
Lesson 1-1
5/10/2018
Basic Accounting Equation
ASSETS = LIABILITIES + OWNERS EQUITY
Stuff that has future
economic benefit: cash,
receivables, inventory,
patents, equipment, etc.
What’s left over is mine.
Things I owe to
to other people:
payables, tax liabilities, loans, mortgages, etc.
Like the basic laws of physics, this equation cannot be out of balance.
LESSON 1-1

7. Accounting Overview Ethics? Principles of right and wrong!
Lesson 1-1
5/10/2018
Accounting Overview
Ethics?
Principles of right and wrong!
Using in business is called Business Ethics
Is the action illegal or violate any laws - if so they don’t do it (examples)
Violate company standards - what is written in the handbook
Does the action violate professional standards - each job has a set of professional standards that are set
Who is affected, and how, by the action? - determine right/wrong and what is ethical to you - determine how the action affects individuals and groups.
LESSON 1-1

8. TERMS REVIEW accounting accounting system accounting records
Lesson 1-1
5/10/2018
TERMS REVIEW
page 9
accounting
accounting system
accounting records
financial statements
service business
proprietorship
asset
equities
liability
owner’s equity
accounting equation
ethics
business ethics
LESSON 1-1

9. Lesson 1-1 How Business Activities Change the Accounting Equation
5/10/2018
LESSON 1-2
How Business Activities Change the Accounting Equation

10. TERMS REVIEW transaction account account title account balance capital
Lesson 1-1
5/10/2018
TERMS REVIEW
page 13
transaction
account
account title
account balance
capital
LESSON 1-1

11. Lesson 1-1
5/10/2018
RECEIVING CASH
page 10
Transaction 1 August 1. Received cash from owner as an investment, $5,
Transaction - the activity that demonstrates what happens
Always be sure to read the transaction, identifying the accounts, and classifying the accounts.
Account - record summarizing information about one item of the accounting equation
Account Title - The name given to the account - this can be anything the company decides on.
Account Balance - the running total of an account such as cash
Capital - is the investment that used to support the company we refer to as Owner’s Equity
LESSON 1-1

12. PAYING CASH Transaction 2 August 3. Paid cash for supplies, $275.00.
Lesson 1-1
5/10/2018
PAYING CASH
page 11
Transaction 2 August 3. Paid cash for supplies, $
Show the transaction then analyze the transaction by answering - what accounts are affected and are they increased or decreased.s
Transaction 3 August 4. Paid cash for insurance, $1,
LESSON 1-1

13. TRANSACTIONS ON ACCOUNT
Lesson 1-1
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TRANSACTIONS ON ACCOUNT
page 12
Transaction 4 August 7. Bought supplies on account from Supply Depot, $
Transaction 5 August 11. Paid cash on account to Supply Depot, $
LESSON 1-1

14. Lesson 1-1
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REVENUE TRANSACTIONS
page 14
Transaction 6 August 12. Received cash from sales, $
Transaction 7 August 12. Sold services on account to Oakdale School, $
LESSON 1-1

15. Lesson 1-1
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EXPENSE TRANSACTIONS
page 15
Transaction 8 August 12. Paid cash for rent, $
Transaction 9 August 12. Paid cash for telephone bill, $40.00.
LESSON 1-1

16. OTHER CASH TRANSACTIONS
Lesson 1-1
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OTHER CASH TRANSACTIONS
page 16
Transaction 10 August 12. Received cash on account from Oakdale School, $
Transaction 11 August 12. Paid cash to owner for personal use, $
LESSON 1-1

17. Lesson 1-1
5/10/2018
REVENUE TRANSACTIONS
page 14
Transaction 6 August 12. Received cash from sales, $
Transaction 7 August 12. Sold services on account to Oakdale School, $
LESSON 1-1

18. Lesson 1-1
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EXPENSE TRANSACTIONS
page 15
Transaction 8 August 12. Paid cash for rent, $
Transaction 9 August 12. Paid cash for telephone bill, $40.00.
LESSON 1-1

19. OTHER CASH TRANSACTIONS
Lesson 1-1
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OTHER CASH TRANSACTIONS
page 16
Transaction 10 August 12. Received cash on account from Oakdale School, $
Transaction 11 August 12. Paid cash to owner for personal use, $
LESSON 1-1

20. TERMS REVIEW revenue sale on account expense withdrawals page 17
Lesson 1-1
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TERMS REVIEW
page 17
revenue
sale on account
expense
withdrawals
LESSON 1-1

21. Lesson 1-1 REPORTING FINANCIAL INFORMATION ON A BALANCE SHEET
5/10/2018
LESSON 1-3
REPORTING FINANCIAL INFORMATION ON A BALANCE SHEET

22. TERMS REVIEW Balance Sheet LESSON 1-1 Lesson 1-1 5/10/2018
A financial statement that reports assets, liabilities, and owner’s equity on a specific date.
LESSON 1-1

23. T- Accounts Represent the Accounting Cycle with a T
Lesson 1-1
5/10/2018
T- Accounts
Represent the Accounting Cycle with a T
This can be the same for a balance sheet - with the sheet making a T
Assets
Liabilities + Owner’s Equity d
LESSON 1-1

24. Liabilities - right side Owner’s Equity - right side
Lesson 1-1
5/10/2018
Body of a Balance Sheet
Three major sections
Assets - left side
Liabilities - right side
Owner’s Equity - right side
LESSON 1-1

25. Steps to Prepare a Balance Sheet
Lesson 1-1
5/10/2018
Steps to Prepare a Balance Sheet
Heading
Name of business
Name of the report
Date of the report
Left Side
Center the word Assets
Under the heading write each asset and amount
Final Line is Total Assets with a single line above and double line below
Right Side
Center the word Liabilities
Under the heading write each Account Payable and amount
Center the word Owner’s Equity
Under the heading write Account title and amount
Final line is Total Liab. And Owner’s Eq. with a single line above and double line below.
Total of both sides must EQUAL - if not equal double check work.
LESSON 1-1

26. Work Together P.8 Answer: $11,000 $4,000 $28,000
Lesson 1-1
5/10/2018
Work Together
P.8
Assets = Liabilities + Owner’s Equity
? $3,000 $8,000
$10,000 ? $6,000
$63,000 $35,000 ?
Answer:
$11,000
$4,000
$28,000
LESSON 1-1

27. Work Together P.12 Assets = Liabilities + Owner’s Equity + + + + +,-
Bought supplies on account
Received cash from owner as an investment
Paid cash for insurance
Paid cash on account
Assets = Liabilities + Owner’s Equity
+,-
LESSON 1-1

28. Work Together
P. 15
Using the October 31 balances in the accounting equation, prepare a balance sheet for the Hess Company
LESSON 1-1