1. Property and Financial Claims
Chapter 3
Section 1

2. Key Terms Assets Property Equities Financial Claim Owner’s Equity
Liabilities
Accounting Equation
Property
Financial Claim
Credit
Creditor

3. What is Property?
Property is anything of value that a person or business owns and therefore controls.
Examples…

4. Financial Claim Financial Claim is the legal right to an item.
When you purchase an something you gain legal right to that item.
In Accounting, Financial Claim is measured in dollar amounts.

5. Financial Claim Cont..
If you purchase an iPad for $500, your financial claim over the iPod is $500.
Property (Cost) = Financial Claim
iPod = Your Claim to the iPod
$500 = $500

6. Purchasing on Credit
When you buy an item and agree to pay for it later is purchasing on Credit.
The business or person selling you the item on credit is called a creditor.
- A Creditor is any person or business to which you owe money.

7. How Credit Affects Financial Claims
If you purchase a car for $25,000 by making a down payment of $3,000 while financing the remaining $22,000 (using a bank loan) the Financial Claim to the car is shared by you and the bank.

8. Credit and Financial Claims Cont…
Property (Cost) = Financial Claim
Car = Claim is shared by you and the bank
$25, = $3,000 (you) +
$22,000 (bank)

9. Financial Claims in Accounting
Assets - property or items of value owned by a business
Cash
Office equipment
Manufacturing equipment
Buildings
Land

10. Financial Claims in Accounting Cont…
Equities - The Accounting term for Financial Claims to an Asset
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11. Financial Claims Cont…
A small company named Roadrunner Delivery Service purchases a Delivery Truck for $10,000. Roadrunner makes a down payment of $3,000. A bank loans the remaining $7,000 to RDS. Both RDS and the bank have a financial claim to the truck.

12. Financial Claims in Business Purchases
Property = Creditor’s Financial Claim
Owner’s Financial Claim
Truck ($10,000) = Bank ($7,000) +
RDS ($3,000)

13. Repayment of Loan
As RDS repays the loan, the Bank’s financial claim over the Truck will decrease as RDS’ financial claim will increase.
When the loan is completely repaid, the creditor’s financial claim will be canceled.

14. Two Types of Equities
Owner’s Equity - Owner’s Financial Claim over an asset.
Liabilities - Creditor’s Claim over an asset.
- These are debts a company owes to another organization.

15. The Accounting Equation
Property = Creditor’s Financial Claim +
Owner’s Financial Claim
Assets = Liabilities
Owner’s Equity