1. Lesson 1-1 What is Accounting? The Accounting Equation
6/26/2018
LESSON 1-1
What is Accounting?
The Accounting Equation

2. What is Accounting?
Planning, recording, analyzing and interpreting financial information is called accounting.
A planned process for providing financial information that will be useful to management is called an accounting system.
Organized summaries of a business’s financial activities are called accounting records.
LESSON 1-1

3. What is Accounting
Financial reports that summarize the financial condition and operations of a business are called financial statements
Are used to make financial decisions
Inaccurate accounting records often contribute to business failure and bankruptcy
LESSON 1-1

4. Types of Business
Service Business: a business that performs an activity for a fee
Examples
Dentist
Construction Business
Hair Salon
Proprietorship: a business owned by one person
Often referred to as a sole proprietorship
LESSON 1-1

5. All About Assets Anything of value that is owned is an asset
Assets have value because they can be used to acquire other assets or to operate a business
Examples:
Cash
Supplies
LESSON 1-1

6. All About Equities and Liabilities
Equities are financial rights to the assets of a business
Two Types
Equity of those to whom money is owed
Buy supplies and agree to pay for at later date
Equity of the owner
Owner has right to make decisions how assets will be used
LESSON 1-1

7. All About Equity and Liabilities
An amount owed by a business is called a liability
Owner’s equity: the amount remaining after the value of all liabilities is subtracted from the value of all assets
LESSON 1-1

8. A Bit About Ethics
Ethics: The principles of right and wrong that guide an individual in making decisions
The use of ethics in making business decisions is called business ethics
LESSON 1-1

9. THE ACCOUNTING EQUATION
Lesson 1-1
6/26/2018
THE ACCOUNTING EQUATION
page 8
LESSON 1-1

10. The Accounting Equation
The Accounting Equation MUST be in balance!
The total amount on the left side must always equal the total of the amounts on the right side!
LESSON 1-1

11. TERMS REVIEW accounting accounting system accounting records
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

12. Review Section 1-1
Workbook
Page 5
Page 6
LESSON 1-1