1. CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 1-1 The Accounting Equation Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School

2. CENTURY 21 ACCOUNTING © Thomson/South-Western 2 LESSON 1-1 What is Accounting? Planning, recording, analyzing, & interpreting financial information (also known as the language of business) In order to do this, you must have some type of

3. CENTURY 21 ACCOUNTING © Thomson/South-Western 3 LESSON 1-1 Accounting System A planned process for providing financial information that will be useful to management Consisting of

4. CENTURY 21 ACCOUNTING © Thomson/South-Western 4 LESSON 1-1 Accounting Records To organize summaries of a business’s financial activities You will use these to create

5. CENTURY 21 ACCOUNTING © Thomson/South-Western 5 LESSON 1-1 Financial Statements Financial reports that summarize the financial condition and operations of a business

6. CENTURY 21 ACCOUNTING © Thomson/South-Western 6 LESSON 1-1 The Business – Techknow Consulting Business Entity – A business’s financial information is recorded and reported separately from the owner’s personal financial information. page 6

7. CENTURY 21 ACCOUNTING © Thomson/South-Western 7 LESSON 1-1 The Business – Techknow Consulting page 6 Service Business A business that performs an activity for a fee Sole Proprietor -ship A business owned by one person

8. CENTURY 21 ACCOUNTING © Thomson/South-Western 8 LESSON 1-1 THE ACCOUNTING EQUATION The Accounting Equation shows the relationship among assets, liabilities, & owner’s equity page 8 It is most often stated as: Assets = Liabilities + Owner’s Equity

9. CENTURY 21 ACCOUNTING © Thomson/South-Western 9 LESSON 1-1 THE ACCOUNTING EQUATION Asset – anything of value that is owned by the business Liability – an amount owed by a business Equities – financial rights to the assets of a business Equity of those to whom money is owed Equity of the owner Owner’s Equity – the amount remaining after the value of all liabilities is subtracted from the value of all assets page 8

10. CENTURY 21 ACCOUNTING © Thomson/South-Western 10 LESSON 1-1 THE ACCOUNTING EQUATION page 8

11. CENTURY 21 ACCOUNTING © Thomson/South-Western 11 LESSON 1-1 TERMS REVIEW accounting accounting system accounting records financial statements service business proprietorship asset equities liability owner’s equity accounting equation ethics business ethics page 9