Accounting Basics: Terms and Transactions

1. Chapter 1 Accounting I

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. More terms • Service Business • Dog Groomer, carpet cleaners. • Sole proprietorship • A single owner business

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

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

7. Mr. Prosser how am I going to remember the accounting equation????

8. How the accounting equation changes • Assets = Liability + Owner’s Equity

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

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

11. 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

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

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

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

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

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

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

18. Work Together Page 13

19. Now work on your own on page 13 • Please check the answers with me or the key in the back of the room.

20. Chapter 1 section 2 Review • Can you do these Transactions????? • Received Cash from Owner $2000 • Bought Supplies with cash $20 • Bought Pre-Paid Insurance $300 • Bought Supplies on Account Mr. Prosser-Supplies $50.00 • Paid Cash on account - Mr. Prosser-Supplies $50.00

21. 2000 • 2000 • 2000 • 2000 • 20 • 20 • 1980 • 20 • 2000 • 300 • 300 • 1680 • 20 • 300 • 2000 • 50 • 50 • 1680 • 70 • 300 • 50 • 2000 • 50 • 50 • 1630 • 70 • 300 • 0 • 2000

22. Chapter 1 Section 3 Transactions that change Owner’s Equity in the accounting equation

23. Terms that you need to know.. • Revenue • An increase in owner's equity resulting from the operation of a business • Sales on account • A sale for which cash will be received at a later date • Expenses • A decrease in owner’s equity resulting from the operation of a business

24. New Asset • Can you name the ones we already know? • Cash • Supplies • Pre-paid Insurance • Accounts Receivable • When someone buys something • From us on account

25. Balances from the first part of the chapter

26. Received Cash from Sales • Transaction #6 • August 12 Received cash from sales, $325

27. Received Cash from Sales • Transaction #7 • August 12, sold services on account to Kids time $200

28. Received Cash from Sales • Transaction #8 • August 12 Paid cash for rent, $250.00

29. Received Cash from Sales • August 12 Paid cash for telephone bill,$45.00 • Transaction #9

30. Received Cash from Sales • August 12 Received cash on account from Kids Time • $100. • Transaction #10

31. Received Cash from Sales • Transaction #11 • August 12. Paid cash to owner for personal use $100.00

32. Do the “work together” together • Do “on your own”

33. Application Problems 1-1,2,3,4

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