1. Starting a Proprietorship
Chapter 1

2. Accounting-planning, recording, analyzing, and interpreting financial information.
Public
Private
$62,000-$109,000
Accounting Clerk
Payroll Clerk
What is Accounting?

3. Accounting system-a planned process for providing financial information that will be useful by management
Accounting records-organized summaries of a business’s financial activities
What is Accounting?

4. What is Accounting? “Accounting is the language of business”
Many companies have failed due to inaccurate accounting records
Understanding accounting helps managers and owners make better business decisions.
What is Accounting?

5. The principles of right and wrong that guide an individual in making decisions
This the action legal?
Does the action violate company or professional standards?
Who is affected and how by the action?
Business Ethics

6. Business Ethics GAAP-Generally accepted accounting principles
Refer to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or standard accounting practice. These include the standards, conventions, and rules that accountants follow in recording and summarizing and in the preparation of financial statements.
Business Ethics

7. The Accounting Equation
Service Business- a business that performs an activity for a fee
Proprietorship- a business owned by one person
Also referred to a sole proprietorship
Name some proprietorship's in and around the Mapleton area
The Accounting Equation

8. The Accounting Equation
Assets- anything of value owned by the company
Cash
Supplies
Prepaid Insurance
**Make sure to keep personal assets separate.
The Accounting Equation

9. The Accounting Equation
Equities- financial rights to the assets of a business
Two different types
1. Equity of those to whom the money is owed
An amount of money owed by a business is called a liability
2.Equity of the Owner
The Accounting Equation

10. The Accounting Equation
Equities- financial rights to the assets of a business
Two different types
2. Equity of the owner
The amount remaining after the value of all assets.
The Accounting Equation

11. The Accounting Equation
Assets = Liabilities + Owner’s Equity
The Accounting Equation

12. The Accounting Equation
Assets =
Liabilities and Owner’s Equity
Left Side
Right Side
The accounting equation MUST be in balance to be correct
The Accounting Equation

13. How Business Activities Change the Accounting Equation
Transaction- A business activity that changes assets, liabilities and O.E
Example: a business that pays cash for supplies.
**AFTER EACH TRANSACTION THE ACCOUNTING EQUATION MUST REMAIN IN BALANCE**
How Business Activities Change the Accounting Equation

14. How Business Activities Change the Accounting Equation
Account- is the single item in the accounting equation
Account title- the name given to the account
Example- Cash, Supplies, Prepaid Insurance
Account Balance- The amount of money in the account
Capital- the account being used to summarize the owner’s equity account
How Business Activities Change the Accounting Equation

15. How Business Activities Change the Accounting Equation
Transactions
Aug. 1 Received cash from owner as investment, $10,000
Aug. 2 Paid cash for supplies, $1,577
Aug. 3 Paid cash for insurance, $1,200
Aug. 7 Bought supplies on account from Living Music Supplies $2,720
Aug. 9 Paid cash to Living Music Supplies, $900
How Business Activities Change the Accounting Equation

16. Preparing a Balance Sheet
Top 3 lines
Name of the business
The name of the report (Balance Sheet)
The date September 10, 2013
Left hand column
“Assets” centered on the top line
Under the “Assets” heading write each asset account and the amount in the second column
Preparing a Balance Sheet

17. Preparing a Balance Sheet
Left hand column
“Assets” centered on the top line
Under the “Assets” heading write each asset account and the amount in the second column
Preparing a Balance Sheet

18. Preparing a Balance Sheet
Right hand column
“Liabilities” centered on the top line
Under the “Liabilities” heading write each liability account and the amount in the second column
** Skip one line**
Preparing a Balance Sheet

19. Preparing a Balance Sheet
Right hand column
Write “Owner’s Equity” centered one line down from the liabilities account.
Under the “Owner’s Equity” heading write the owner’s equity account and the amount in the second column
Preparing a Balance Sheet

20. Preparing a Balance Sheet
Under the list of assets, write “Total Assets”
Add up all the asset amounts and write the total next to the “Total Assets” line
Under the list of liabilities and OE, write “Total Liabilities’ and Owner’s Equity”
Add up all the liabilities' amounts and OE amounts and write the total next to the “Total Liabilities’ amounts and OE”
Preparing a Balance Sheet

21. Preparing a Balance Sheet
Ask yourself, Do they match?
If yes, double underline the totals
If no, re-check your work to find the error.
You have successfully made a Balance Sheet!!
Preparing a Balance Sheet