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Mastering Basic Accounting: Foundations and Principles

Gain insight into the language of business with accounting. Learn to prepare and interpret financial statements for better decision-making. Understand the importance of accurate record-keeping to avoid business failures like Enron. Explore key terms like assets, liabilities, and owner's equity. Dive into ethics to guide your decision-making in the business world.

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Mastering Basic Accounting: Foundations and Principles

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  1. Ch. 1 What is Accounting?

  2. 1.1 Objectives • The student will be able to… • Describe the different user of Accounting information • Prepare a networth statement and describe its purpose

  3. General Info. • Accounting is the language of business! • Understanding accounting helps managers & owners make better business decisions. • Failure to understand accounting info. can result in poor business decisions. • Inaccurate accounting records often contribute to business failure and bankruptcy. ENRON!

  4. Terms • Accounting- • Planning, recording, analyzing, and interpreting financial information. • Accounting Systems- • A planned process for providing financial information that will be useful to management

  5. Terms Continued • Financial Statements – • Financial reports that summarize the financial condition and operations of a business. • Net Worth Statement – • A formal report that shows what an individual owns, what an individual owes, and the difference between the two.

  6. Key Terms • Asset- • Anything of value that is owned. They can be used to acquire other assets or be used to operate a business.For your note card: • Cash • Accounts Receivable • Supplies • Insurance • Petty Cash

  7. Key Terms • Liability-(DEBT) • An amount owed by a business (at a later date). • Accounts Payable (on note card) • House 180,000-50,000=130,000 • Equities- (Owner’s Equity) • (Financial rights to the assets of a business. Purchase price-payments made (equity)=Balance owed (debt)

  8. Yes, More Terms Personal Net Worth The difference between personal assets and personal liabilities. Used in determining the financial position of the borrower (obtaining loans for homes, cars, etc.)

  9. Yes, More Terms Owner’s Equity- (the value of ownership) • The amount remaining after the value of all liabilities is subtracted from the value of all assets. • Assets-Liabilities = Owner’s Equity

  10. Final Terms for 1.1 Ethics – The principles of right and wrong that guide and individual in making decisions. Business Ethics – The use of ethics in making business decisions.

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