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DO NOW:

DO NOW:. Complete the Survey on my desk When finished, take: 2 textbooks 1 Working Papers workbook on the side bookshelf 1 Obligation form Preview your books. Housekeeping. Textbook Online Activities Preview Xtra for online activities. The Accounting Equation. Chapter 1

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DO NOW:

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  1. DO NOW: • Complete the Survey on my desk • When finished, take: • 2 textbooks • 1 Working Papers workbook • on the side bookshelf • 1 Obligation form • Preview your books

  2. Housekeeping • Textbook Online Activities • Preview Xtra for online activities

  3. The Accounting Equation Chapter 1 Starting a Proprietorship: Changes That Affect the Accounting Equation

  4. What is accounting?(4 important definitions to understand accounting) • Accounting is planning, recording, analyzing, and interpreting financial information. • Accounting system is a planned process for providing financial information that will be useful to management. • Accounting records are organized summaries of business financial activities. • Financial statements are financial reports that summarize the financial conditions and operations of a business.

  5. Accounting is the language of business • The Language of Business

  6. Why study accounting? • Why study accounting? Consistently ranked among the best jobs in America

  7. The Accounting Profession • What do accountants do? • Your first job usually at a public accounting firm • Deloitte Touche Tohmatsu • Ernst & Young • KPMG • PricewaterhouseCoopers • Move on to careers with an accounting focus in business or government • Can move into partnership in a firm, Chief Financial Officer

  8. Careers in accounting - Activity • Read and Pass activity: • Read the article on a type of accountant, take notes • Pass your article on, and take the next article • When all articles are read, discuss the different types of accountants in your group. Decide which type might be the best fit for you.

  9. The business we’ll work with… • TechKnow • Proprietorship (sole proprietorship) – a business owned by one person. • Service business – a business that performs an activity for a fee

  10. Proprietorship • Why might a business organize as a proprietorship? • Because the owner retains TOTAL control of the company. • Characteristics of a proprietorship • Owner is personally responsible for the debts of the proprietorship. • Owner has sole authority to act for the proprietorship.

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

  12. The accounting equation • Assets • Anything of value that is owned. Ex. Cash to buy supplies for the business. • Liabilities • The amount owed by a business • Ex. Money borrowed from banks • Owner’s Equity • Owner’s interest in the business

  13. The accounting equation • The equation shows the relationship among items of value a business has and the financial rights to the item. • The equation must always have equal amounts on each side. • The equation is made up of assets, liabilities, and owner’s equity.

  14. The accounting equation • Assets = Liabilities + Owner’s Equity • A business has assets of $100,000 and liabilities of $60,000. What is the owner’s equity? • $100,000 = $60,000 + ? • ? = $40,000 • The equation would be….. • $100,000 = $60,000 + $40,000

  15. The accounting equation • The Accounting Equation

  16. The accounting equation • Work Together, p. 9 • Complete the blanks to balance the accounting equation. • Read about TechKnow Consulting’s accounting equation on p. 8

  17. Assets, liabilities, and owner’s equity accounts Accounting Basics Lesson 4: Assets, Liabilities, Owner's Equity, Accounts Payable. danieldickson2 10 videos Subscribe Subscribed

  18. Assets, liabilities and owner’s equity Activity – Work in partnerships and classify the account titles as assets, liabilities or owner’s equity

  19. What changes the Accounting Equation?

  20. Transactions • Business activities that change the accounting equation are called transactions. • After each transaction the accounting equation must remain in balance.

  21. Cash Transactions

  22. Receiving Cash TechKnow owner Kim Park uses $5,000 of her own money To invest in TechKnow. P. 11 Cash (Asset) is increased by $5000, Kim Park, Capital Acct (OE) is increased by $5,0000

  23. Paying Cash TechKnow owner Kim Park uses $275 of TechKnow’s cash To buy supplies. P. 11 Cash (Asset) is decreased by $275, Supplies (Asset) is increased by $275

  24. Paying Cash for Insurance TechKnow owner Kim Park uses $1,200 of TechKnow’s cash to pay her insurance premium for a year’s worth of insurance. She’s prepaying for insurance that she’ll have for the year. P. 11 Cash (Asset) is decreased by $1200, Prepd Insurance (Asset) is increased by $275

  25. On Account Transactions We think of it as ‘charging’ something. We put the purchase ‘on account’ with the vendor. We later pay ‘on account’, and pay off what we owe.

  26. Buying Supplies on Account TechKnow needs supplies, and arranges to pay for them at the end of the month. p. 12 Supplies (Asset) is increased by $500, Supply Depot (Liabilities) is increased by $500

  27. Paying Cash for Supplies on Account TechKnow has to pay a portion of the supply costs. (New businesses don’t have a positive credit profile yet, so they get very limited terms for repayment.) p. 12 Supplies (Asset) is increased by $500, Supply Depot (Liabilities) is increased by $500

  28. In Summary, to balance your accounting equation: • If transactions are on both sides of the equal sign, add or subtract both. • + = + or- = - • If transactions occur on one side of the = sign, add and subtract on that side. • +,- =or-,+ =or = +,-or = -+

  29. PRACTICE • Determine how transactions change an accounting equation. • Work Together 1-2 • Txtbk p. 13, Working Papers p. 7 • On Your Own 1-2 • Txtbk p. 13, Working Papers, p. 8

  30. Received Cash from Sales TechKnow receives cash for from sales, $295. Revenue is earned. p. 14 Cash (Asset) is increased by $295, Kim Park, Capital (OE) is increased by $295

  31. Sold Services on Account TechKnow makes a sale, but won’t receive cash for it until later. It’s a charge sale, or sale on account. $350. Revenue is earned. p. 14 Accts Rec (Asset) is increased by $350, Kim Park, Capital (OE) is increased by $350

  32. Paid Cash for Rent Techknow pays cash for rent, $300. p. 15 Cash(Asset) is decreased by $300, Kim Park, Capital (OE) is decreased by $300

  33. Paid cash for Phone Bill Techknow pays cash for a phone bill, $40. p. 15 Cash(Asset) is decreased by $40, Kim Park, Capital (OE) is decreased by $40

  34. Paid cash on Account Techknow receives cash on account from Oakdale School, $200. p. 16 Cash(Asset) is increased by $200, Accts Rec, Oakdale School (Assets) is decreased by $200

  35. Paid cash to owner for personal use Techknow’s owner, Kim Park, withdrawals $125 for personal use. p. 16 Cash(Asset) is decreased by $125, Kim Park, Capital (OE) is decreased by $125

  36. PRACTICE • Work Together 1-3 • Txtbk, p. 17 • Working Papers, p. 9 • On Your Own 1-3 • Txtbk, p. 17 • Working papers, p. 10

  37. **Chapter 1 Test – Wednesday, September 19th

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