1. The Accounting Equation and Double-entry Bookkeeping 会计等式和复式记账法
Chapter 1
The Accounting Equation and Double-entry Bookkeeping
会计等式和复式记账法 2

2. Introduction to Financial Statements
Income Statement
Balance Sheet
Statement of Cash Flows
Three primary financial statements.
We will use a sole proprietorship to describe these statements.

3. Statement of Financial Position: A Starting Point

4. Assets(资产)
Assets are economic resources that are owned by the business and can be measured in monetary term.

5. Liabilities are debts that a business owes its creditors.

6. Owner’s Equity(所有者权益)
Owner’s equity represents the owner’s claim to the net assets of the business.

7. Owner’s Equity
Net assets
Net worth
Capital
Proprietorship

8. The Accounting Equation 会计等式
Assets = Liabilities + Owner’s Equity
$300,000 = $80, $220,000 3

9. Exercise in class
II. Problems:1(on page 33).

10. Let’s analyze some transactions for Guangli service!

11. Accounts Payable(应付账款）
Accounts Payable is the debt that the business owes its supplier for the goods or services provided.

12. Prepaid Insurance（预付保险费）
Prepaid Assets are the resources paid for before receiving the actual benefits.
e.g. insurance /advertisement fee

13. Accounts（账户）
The basic recording unit of accounting information

14. Revenue(收入）
Revenues are the amounts of assets that a business earns as a result of selling goods or rendering service in form of receiving the credit card receipts or check or receivable.
Receivables are the amounts owed to a business by customers.

15. Expense（费用）
Expenses are the amounts of assets that a business uses up in the process of generating revenues which reduce the owner’s equity.
e.g. utility fee (electricity and water bill), payroll

16. Difference between expenses and prepaid assets
Expense: the payment is made after the use of assets.
Prepaid assets: the payment is made before the use of the assets.
Prepaid assets should be transferred into expense when the relevant asset is used up.

17. Question one
Mr. Li paid 2000 yuan for the office rent of the month. Is that a kind of expense ?

18. Owner’s Equity(所有者权益)
Changes in Owner’s Equity
Revenue
Expense

19. Double-entry Bookkeeping (复式记账法)
An accounting system by which each transaction is recorded in at least two accounts and the accounting equation is still kept in balance.
Assets = Liabilities Owner’s Equity

20. Assets = Liabilities + Owner’s Equity
Accounting Equation
Assets = Liabilities Owner’s Equity

21. The Use of Accounts
Increases are recorded on one side of the T-account, and decreases are recorded on the other side.
Title of Account
Left or Debit Side
Right or Credit Side

22. Cash(现金) (a) 1000000 (f) 2000 100200 (b) 360000 (c) 200000 (d) 9000
(e) 3600
(g) 200
572800
Footings
Bal

23. Let’s use the previous information and see how debits and credits are recorded in the Cash account for Guangli services.

24. Debit and Credit Rules (借贷记账法)
Debits and credits affect accounts as follows:
A = L + OE
ASSETS
Debit for Increase
Credit for Decrease
LIABILITIES
Debit for Decrease
Credit for Increase
EQUITIES
Debit for Decrease
Credit for Increase 13

25. Each account has a normal balance.
Normal Balances
Each account has a normal balance.
Liabilities
Equity
Assets = +

26. Debits and Credits for Revenue and Expense
Expenses decrease owner’s equity.
Revenues increase owner’s equity.
EQUITIES
Debit for Decrease
Credit for Increase
EXPENSES
Credit for Decrease
Debit for Increase
REVENUES
Debit for Decrease
Credit for Increase

27. Each account has a normal balance.
Normal Balances
Each account has a normal balance. _
Owner’s Capital +
Revenues
Expenses

28. Account Receivable (应收账款）
Receivable includes all the money claimed against people, organizations, or other debtors when a business provides the service or sells the merchandise.
e.g. Notes Receivable / Accounts Receivable

29. Drawing
Asset withdrawn from an business by its owners for their personal use.
e.g. You are the owner of a small business. The mortgage payment on your home is due, but you have little money in your personal checking account. Therefore, you write a check for this payment from your business bank account.

30. Investments and Withdrawals by the Owner
An owner’s withdrawals decrease owner’s equity.
An owner’s investments increase owner’s equity.
EQUITIES
Debit for Decrease
Credit for Increase
JILL JONES, CAPITAL
Debit for Decrease
Credit for Increase
JILL JONES, DRAWING
Debit for Increase
Credit for Decrease

31. Each account has a normal balance.
Normal Balances
Each account has a normal balance.
Revenues
Expenses
Owner’s Capital
Owner’s Withdrawals _ +
Continue

32. Each account has a normal balance.
Normal Balances
Each account has a normal balance.
Revenues
Expenses
Owner’s Capital
Owner’s Withdrawals _ +

33. Double Entry Accounting - The Equality of Debits and Credits
A +E+D= L+C+R =
Debit balances
Credit balances
In the double-entry accounting system, every transaction is recorded by equal dollar amounts of debits and credits. 13

34. Trial Balance 试算平衡表
A list of all the account balances at a given point of time in the following order: assets, liabilities, owner’s equity, revenue and expenses.

35. Assignments
Problems 3, page 33
A4 paper
Better to use pencil