1. Bell Ringer
Please get a white board and write your name on it like we did on Friday. Take out a sheet of paper and answer: What do you think accounting is? -you will use the same piece of paper all week for bell work.

2. Introduction Video

3. Starting A Proprietorship
Chapter 1

4. Section 1-1: The Accounting Equation
Objectives
Define accounting terms related to starting a service business organized as a proprietorship and to changes that affect the accounting equation
Identify accounting concepts and practices related to starting a service business organized as a proprietorship and to changes that affect the accounting equation.

5. What is accounting?
Accounting is planning, recording, analyzing, and interpreting financial information.
ACCOUNTING IS THE LANGUAGE OF BUSINESS.
An accounting system is a planned process for providing financial information that will be useful to management.
Accounting records are organized summaries of a business’s financial activities.

6. What is accounting?
Financial Statements are financial reports that summarize the financial condition and operations of a business.
Four Financial Statements:
Income Statement
Balance Sheet
Statement of Cash Flows
Statement of Owner’s Equity

7. The Business
Service Business is a business that performs an activity for a fee.
Ex. Hair cuts, oil changes, school, garbage pick up.
Proprietorship is a business that is owned by one person.
Also can be called a sole proprietorship.

8. Advantages of a Proprietorship
Ease of formation
Total control by owner
Profits are not shared

9. Disadvantages of a Proprietorship
Limited resources: only owner can invest.
Unlimited reliability: responsible for everything.
Limited expertise: limited time, energy, and experience can be put into by the owner.
Limited life: must be dissolved when the owner dies.

10. Business Entity Concept
The business entity concept is applied when a business’s financial information is recorded and reported separately from the owners personal information.

11. The Accounting Equation
An equation showing the relationship among assets, liabilities, and owner’s equity.
Financial accounting is based upon the accounting equation.
Assets = Liabilities + Owners' Equity
This is a mathematical equation which must balance.
If assets total $300 and liabilities total $200, then owners' equity must be $100.

12. Accounting Equation Video

13. The Basic Accounting Equation

14. Assets Assets are anything of value that is owned.
Have value because they can be used either to acquire other assets or to operate a business.
Ex. Cash, accounts receivable, equipment, land, buildings, cars, inventory, supplies.

15. Liabilities Liabilities are an amount owed by a business.
Liabilities are claims by people external to the business.
Ex. Notes payable, accounts payable, & wages payable.

16. Owners' Equity
Owner’s Equity is the amount remaining after the value of all liabilities is subtracted from the value of all assets.
Equities are financial rights to the assets of a business.

17. Owners’ Equity = Assets – Liabilities
Yet another name for owners' equity is net assets.
Indicates that owners' equity results when liabilities are subtracted from assets.
Owners’ Equity = Assets – Liabilities

18. The Basic Accounting Equation
Both liabilities and owners' equity represent claims on the assets of a business.

19. Making Ethical Decisions
Ethics are the principles of right and wrong that guide an individual in making decisions.
Business ethics are the use of ethics in making business decisions.
Entering the 21st century, Enron, Worldcom, and Andersen were three of the biggest names in corporate America. The actions of these companies are the reason we have strict ethics rules today.

20. Review What is accounting? Give two examples of a service business.
What is a proprietorship?
State the accounting equation.

21. Work Together 1-1
For each line, fill in the missing amount to complete the equation
Assets = Liabilities OE
? = $ $8000
2. $10, = ? $6000
3. $63, = $ ?

22. On Your Own 1-1 Fill in the missing amount 30,000 ? 13,000 60,000
Assets =
Liabilities +
Owner’s Equity
30,000 ?
13,000
60,000
20,000
51,000
25,000

23. Section 1-2: How Business Activities Change the Accounting Equation
Objectives
Define accounting terms related to starting a service business organized as a proprietorship and to changes that affect the accounting equation.
Identify accounting concepts and practices related to starting a business organized as a proprietorship and changes that affect the accounting equation.
Analyze how transactions affect accounts in an accounting equation.

24. Business Activities
Transaction is a business activity that changes assets, liabilities, or owner’s equity.
After each transaction the accounting equation must remain in balance.
Ex. A business that pays cash for supplies.

25. Business Activities
Unit of Measurement concept is applied when business transactions are stated in numbers that have common values– that is, using a common unit of measurement.

26. Business Activities
Account is a record summarizing all the information pertaining to a single item in the accounting equation.
Account title is the name given to the account.
Account balance is the amount that is an account.

27. Business Activities
Capital is the account used to summarize the owner’s equity in a business.
An Owner’s Equity account.

28. New Business Example Receiving Cash
Assets = Liabilities OE
Beginning Balance $ $ $0
Received cash from
Owner as an investment ,
New Balance $ $ $5000
*Do textbook chapter example for cash paid p.10*

29. Review
What must be done if a transaction increases the left side of the accounting equation?
How can a transaction affect only one side of the accounting equation?
To what does the phrase on account refer?

30. Work Together 1-2 Transaction Number Assets = Liabilities +
Owner’s Equity
1. Bought Supplies on Account.
2. Received cash from owner as an investment.
3. Paid cash for insurance
4. Paid cash on account

31. ON YOUR OWN Application problem 1-2 on page 19
Work alone or in groups of 2 or 3

32. Bell Ringer: What are the four financial statements?
Wednesday, August 9
Bell Ringer: What are the four financial statements?

33. Review for Quiz

34. Section 1-3: How Transactions Change Owner’s Equity in an Accounting Equation
Objectives
Define accounting terms related to starting a service business organized as a proprietorship and to changes that affect the accounting equation.
Identify accounting concepts and practices related to starting a service business organized as a proprietorship and to changes that affect the accounting equation.
Analyze how transactions affect accounts in an accounting equation.

35. Revenue Transactions
A transaction for the sale of goods or services results in an increase in owner’s equity.
Revenue is an increase in owner’s equity resulting from the operation of a business.
Example: receive cash from sales
A retail store such as Wal-Mart earns revenues by selling goods to customers.
A CPA firm earns revenues by providing services such as tax return preparation or auditing.

36. Revenue Transactions
Sale on account is when a sale has occurred and cash will be received at a later date.
Also known as a charge sale.
REVENUE IS RECORDED AT THE TIME OF THE SALE.
Realization of revenue is applied when revenue is recorded at the time goods or services are sold.

37. Expense Transactions
A transaction to pay for goods or services needed to operate a business results in a decrease in owner’s equity.
“The cost of doing business”
Expense is a decrease in owner’s equity resulting from the operation of a business.
Ex. Paying cash for rent or utilities.
WHO CAN GIVE ME AN EXAMPLE?

38. Other Cash Transactions
Withdrawals are assets taken out of a business for the owner’s personal use.
Ex. Owner taking out cash to go on a vacation. Decreases that asset account cash and decreases the owner’s equity capital account.

39. Review
How is owner’s equity affected when cash is received from sales?
How is owner’s equity affected when services are sold on account?
How is owner’s equity affected when cash is paid for expenses?

40. Work Together 1-3 On Board

41. ON YOUR OWN Application problem 1-3 on page 20
Work alone or in groups of 2 or 3