1. Anything of Value Owned by the Business
Assets
Anything of Value Owned by the Business

2. Types of Assests Cash Furniture Equipment Automobiles Property
Accounts Receivable
Prepaid Insurance

3. Financial Obligations of the Business
Liabilities
Financial Obligations of the Business

4. Types of Liabilities Accounts Payable Loans Payable Taxes Payable
Notes Payable
Interest Payable
Rent Payable
Any Payable

5. Owner’s Equity
The Difference between the Value of the Assests and the Value of the Liabilities = What the Business is worth if it were sold today!

6. Owner’s Equity Accounts
Owner’s Capital Account
(value of cash contributed by owner plus income and minus expenses)
Accounts that effect Owner’s Capital
Expense Accounts
Rent Expense
Insurance Expense
Revenue Accounts
Sales
Other Income

7. Assets MUST Equal Liabilities + Owner’s Equity!

8. Debits and Credits What do they mean?
On your bank statement?
Debit means the bank has reduced its liability to you.
Credit means the bank has increased its liability
On your credit card statement?
Each time you use the card, you increase your liability (credit).
ATM (Debit Card)
Each time you use it, the bank’s liability is reduced.

9. So, what do Debit and Credit mean in Accounting terms?
Debit = Left
Credit = Right
Nothing more, Nothing Less

10. T Accounts (assets)
Cash
Debit
Credit - +

11. T Accounts (Liab/OE)
Accounts Payable
Debit
Credit - +

12. The Accounting Equation
Assets = Liabilities + Owner’s Equity
ABC Supply Co.
Richie Rich Capital
Cash
Supplies
150
300
250
5000
5000
100
100
1000
150
300
1200
Do Rite Cleaners
500
Rent Expense
Sales
250
500
1000
Prepaid Ins.
Accts Rec.
1200
Loans Payable
Debits always equal credits!!