1. Chapter 1 Starting a Proprietorship

2. Terms that you need to know  Accounting  Planning recording analyzing and interpreting financial information  Accounting System  A process for providing financial information that will be useful to management

3.  Accounting Records  Organized summaries of a business’s financial activities  Assets  Anything of value that is owned  Cash Insurance  Supplies  Equities  Financial rights to the assets of a business  Liabilities  An amount owed by a business  Any business that we buy something from  Owner’s Equity  The amount remaining after the value of all liabilities subtracted from the value of all assets  (Owner’s Name), Capital Account

5. The accounting equation  Property = Credit+ Equity  Assets = Liability + Owner’s Equity $15,000 $8000 $7000

6. How the accounting equation changes  Assets = Liability + Owner’s Equity

7. More terms  Transaction  A business activity that changes asset’s, liabilities, or owner’s equity  Account  Each transaction effects at least 2 accounts  Account Title  Each account has its own title

8.  Each account has a ACCOUNT BALANCE  Each balance should be a positive number  Capital Account  The account that summarizes the owner’s equity

9. Work together page 8 Now you do On your own………….

10. Section 2  How business activities change the accounting equation

11. Remember the accounts ASSETS=Liabilities + Owners Equity Cash Supplies Prepaid Insurance Accts Pay – Name of Company Name of Owner, Capital

12. Transaction #1 August 1. Received cash from owner as an investment, $10,000.  Assets = Liability + Owner’s Equity Cash Barbara Trevino, Cap $10,000 Do Assets = Liabilities + Owner’s Equity?

13. Transaction #2 August 3. Paid cash for Supplies $1577.  Assets = Liability + Owner’s Equity Cash Barbara Trevino, Cap $10,000 Supplies $1577 Do Assets = Liabilities + Owner’s Equity?

14. Transaction #3 August 4 Paid cash for insurance $1,200  Assets = Liability + Owner’s Equity Cash Barbara Trevino, Cap $10,000 Supplies $1577 Prepaid Ins $1200 $7223 1577 1200 10,000 Do Assets = Liabilities + Owner’s Equity?

15. Transaction #4 August 7 Bought supplies on account from Ling Music Supplies $2,720  Assets = Liability + Owner’s Equity Cash Barbara Trevino, Cap $10,000 Supplies $1577 Prepaid Ins $1200 $2720 Acct Pay Ling Music Supplies Do Assets = Liabilities + Owner’s Equity?

16. Transaction #5 August 11. Paid cash on account to Ling Music Supplies $1360  Assets = Liability + Owner’s Equity Cash Barbara Trevino, Cap $10,000 Supplies $1577 Prepaid Ins $1200 $2720 Acct Pay Ling Music Supplies Do Assets = Liabilities + Owner’s Equity? $1360

17. Work Together Page 12

18.  Now work on your own on page 12  Please check the answers with me or the key in the back of the room.

19. Chapter 1 Section 3 Preparing a Balance Sheet

20. Transaction #5 August 11. Paid cash on account to Ling Music Supplies $1360  Assets = Liability + Owner’s Equity Cash Barbara Trevino, Cap $10,000 Supplies $1577 Prepaid Ins $1200 $2720 Acct Pay Ling Music Supplies Do Assets = Liabilities + Owner’s Equity? $1360 $5863 $4297 $1200 $1360 $10000

21. We need to create a sheet that totals all of these accounts so that we can have it on one sheet of paper.  We create a sheet called a balance sheet  Balance sheets contain  Assets  Liabilities  Owner’s Equity

22. $5863 $4297 $1200 $1360 $10000  Assets = Liability + Owner’s Equity

23. To Create a balance sheet  Title the sheet (all information is centered)  Name of the company  Name of the sheet  Date sheet was created

24. $5863 $4297 $1200 $1360 $10000  Assets = Liability + Owner’s Equity

25. To Create a balance sheet  Title the sheet (all information is centered)  Name of the company  Name of the sheet  Date sheet was created  Step two  Label the Assets section and place all of the assets in with totals

26. $5863 $4297 $1200 $1360 $10000  Assets = Liability + Owner’s Equity

27. To Create a balance sheet  Title the sheet (all information is centered)  Name of the company  Name of the sheet  Date sheet was created  Step two  Label the Assets section and place all of the assets in with totals  Step Three  Label Liabilities and owners equity and total

28. $5863 $4297 $1200 $1360 $10000  Assets = Liability + Owner’s Equity

29. To Create a balance sheet  Title the sheet (all information is centered)  Name of the company  Name of the sheet  Date sheet was created  Step two  Label the Assets section and place all of the assets in with totals  Step Three  Label Liabilities and owners equity and total  Step four  Double underline both sides indicates we are done with the sheet.

30. Working together page 15

31.  Problem 1-1,2,3,4,5,6

32. Assets=Liabilities+Owners Equity 90,000 49,000 68,000 30,000 3,000 2,000 108,000 60,000 19,000 11,000 4,000 12,000 25,000 13,000 113,000 49,000 4,000 2,000 86,000 48,000 12,000 7,000 5,000 14,000

33. Review of Chapter 1  Definition of Accounting  Defined important vocab terms  Asset  Liability  Owners Equity  Discussed the Accounting Equation  Saw the relationship between the Accounting Equation and Transactions  Learned how to create a balance sheet

34. Can you do this transaction  Received Cash from owner, Mr. Parks as investment $10,000  Bought supplies with Cash $2000  Bought supplies on Account – Mr. Prosser Supplies $1000  Paid cash on Account – Mr. Prosser $500

35. Assets = Liabilities + Owners Eq CASH Mr. Parks, Capital $10,000 Supplies $2000 $8000 $2000 $10,000 $1000 Accts Pay- Mr. Parks $1000 $8000 $3000$1000$10,000 $500 $7500$3000$500 $10,000