1. Learning Objectives © 2014 Cengage Learning. All Rights Reserved. LO1Show the relationship between the accounting equation and a T account. LO2 Identify the debit and credit side, the increase and decrease side, and the balance side of various accounts. LO3 Restate and apply the two rules that are associated with the increase side of an account.

2. Defining Main Terms SLIDE 2 Owners Equity: the amount remaining after the value of all liabilities is subtracted from the value of all assets (differ from net-worth) Liabilities: the amount owned (bills, payables) Assets: anything of value that is owned (possessions) Equities: financial rights to the assets of another business (percentage, skin)

3. © 2014 Cengage Learning. All Rights Reserved. Analyzing the Net Worth SLIDE 3 LO1 Lesson 2-1 Assets – Liabilities = Net Worth

4. © 2014 Cengage Learning. All Rights Reserved. Accounts ●A record summarizing all the information affecting a single item in the accounting equation is known as an account. ●An accounting device used to analyze transactions is called a T account. This type of account equations allow you to see how one side of an accounting transaction is reflected in another account. ●Debit(-) means an amount recorded on the left side of an account. ●Credit(+) means an amount recorded on the right side of an account. SLIDE 4 Lesson 2-1 LO2

5. © 2014 Cengage Learning. All Rights Reserved. T - Accounts SLIDE 5 Lesson 2-1 LO2 Owner's equity and net-worth typically are used to mean the same thing. However, one difference is that owner's equity more often defines the value of an individual's investment in a business, whereas net-worth refers to the overall book value of the company.

6. © 2014 Cengage Learning. All Rights Reserved. Increases, Decreases, and Balances in Accounts SLIDE 6 LO3 Lesson 2-1

7. © 2014 Cengage Learning. All Rights Reserved. SLIDE 7 Helpful Hint