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Accounting—The Language of Business

Accounting—The Language of Business. Lecture Presentation 1-2 How Business Activities Change the Accounting Equation. Learning Objectives. Define accounting terms related to starting a service business organized as a proprietorship and to changes that affect the accounting equation.

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Accounting—The Language of Business

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  1. Accounting—The Language of Business Lecture Presentation 1-2 How Business Activities Change the Accounting Equation

  2. Learning Objectives Defineaccounting terms related to starting a service business organized as a proprietorship and to changes that affect the accounting equation. Identifyaccounting concepts and practicesrelated to starting a service business organized as a proprietorship and to changes that affect the accounting equation. Analyze how transactions affect accounts in an accounting equation

  3. Some Vocabulary: Pg. 10 Transaction = A business activity that changes assets, liabilities, or owner’s equity ACCOUNTING CONCEPT : Unit of Measurement = Transactions are stated in numbers that have common values…(dollars, pounds, yen)

  4. A Few More Concepts: Pg. 10 Account = A record summarizing all the information pertaining to a single item in the accounting equation (Cash, Supplies, Insurance) Account Title = The name given to an account Account Balance = The amount in an account Capital = The account used to summarize owner’s equity

  5. Transactions: Receiving Cash, Pg. 10 Transaction 1: August 1st. Received cash from owner as an investment, $5,000 What Accounts are affected? Cash and Kim Park, Capital

  6. Transaction 2: August 3rd. Paid cash for supplies, $275.00 What accounts are affected Cash and Supplies Transactions: Paying Cash, Pg. 11

  7. Transaction 3: August 4th. Paid cash for insurance, $1,200.00 What accounts are affected Cash and Insurance Transactions: Paid Cash for Insurance, Pg. 11

  8. Transaction 4: August 7th. Bought supplies on account from Supply Depot, $500 What accounts are affected Supplies and Accounts Payable, Supply Depot Transactions on Account: Bought Supplies on Account. Pg. 12

  9. Transaction 5: August 11th. Paid cash on account to Supply Depot, $300.00. What accounts are affected Cash and Accounts Payable, Supply Depot Transactions on Account: Paid Cash on Account. Pg. 12

  10. Term Review & Audit Understanding Transaction Account Account Title Account Balance Capital What must be done if a transaction increases the left side of the accounting equation? How can a transaction affect only one side of the accounting equation? To what does the phrase on account refer?

  11. Work Together/On Your Own • Page 13…Work Together 1-2 • Page 13…On Your Own 1-2 • Page 19-21… • Application Problem 1-2 • Application Problem 1-3 • Page 23… • Read Cases for Critical Thinking (Case 1) • Page 23… • Analyzing Best Buy’s Financial Statements • Answer questions 1 & 2

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