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Introduction to Accounting

Introduction to Accounting. Written by Ruby Ann Sawyer, Brantley County Middle School. What is accounting?. the system of recording and summarizing financial transactions and analyzing, verifying, and reporting the results http://www.merriam-webster.com/dictionary/accounting.

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Introduction to Accounting

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  1. Introduction to Accounting Written by Ruby Ann Sawyer, Brantley County Middle School

  2. What is accounting? the system of recording and summarizing financial transactions and analyzing, verifying, and reporting the results http://www.merriam-webster.com/dictionary/accounting

  3. Who uses accounting? • Everyone! • Businesses use accounting information to run the business. • Investors use it to make decisions about whether to buy a company’s stocks. • Creditors use it to make decisions about whether to loan money to a company. • IRS use it to determine how much taxes the company must pay. • Customers use the information to determine which company to purchase products or services from (you want a company that is going to be around in the future).

  4. Key Terms • Assets – things you own • Liabilities – a debt or obligation (money owed) • Owner’s Equity – the amount of the initial investment plus retained earnings. • Income – a monetary gain (usually from the sale of products or services) • Expenses – financial burdens; cost

  5. What is credit & debit? • Credit – the entry on the right side of an account • Debit – the entry on the left side of an account Account Name Debit Credit

  6. Example of Debit & Credit Type of Account Asset Account Asset Account Debit Increases Credit Decreases In this example, your parents gave you $150 cash and you spend $100 on clothes.

  7. Example of Debit & Credit Type of Account Asset Account Asset Account Debit Increases Credit Decreases In this example, your parents gave you $150 cash and you spend $100 on clothes. Cash $150 $100 $50 What is the balance of your cash account?

  8. Financial Statements • Balance Sheet - An official financial statement that includes the company’s assets and liabilities. It determines the value of the company by subtracting liabilities from assets. • Income Statement - A financial statement of a company’s operation. Shows a company’s income, expenses, and income for a period of time. Shows the company’s profit or loss for a given period of time.

  9. BCS III – Accounting UnitEssential Questions • What are debits? credits? • What are the basic account types? • What is an Income Statement? • What is a Balance Sheet? Let’s get started!

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