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Accounting Planning, recording, analyzing, and interpreting financial information

What is Accounting?. Accounting Planning, recording, analyzing, and interpreting financial information Accounting System A planned process for providing financial information that will be useful to management. What is Accounting?. Accounting Records

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Accounting Planning, recording, analyzing, and interpreting financial information

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  1. What is Accounting? • Accounting • Planning, recording, analyzing, and interpreting financial information • Accounting System • A planned process for providing financial information that will be useful to management

  2. What is Accounting? • AccountingRecords • Organized summaries of a business’s financial activities • Financial Statements • Financial Reports that summarize the financial condition and operations of a business

  3. THE BUSINESS – TECHKNOW CONSULTING • Service Business • Performs an activity for a fee • Ex: McDonald’s cooks your food for you • Proprietorship (Sole Proprietorship) • A business owned by one person

  4. ( ) BUSINESS STRUCTURES Forming and Dissolving a Proprietorship • Critical Thinking • Why do you think more businesses are organized as proprietorships than any other form of business organization? • What kinds of people do you think would be most successful as owners of a proprietorship?

  5. The Accounting Equation Right side amount Left side amount $0 = $0 + $0 Assets = Liabilities + Owner’s Equity • Asset • Anything of value owned by a business • Equities • Financial rights to the assets of the business • Liability • Any amount owed by a business

  6. Owner’s Equity • The amount remaining after the value of all liabilities is subtracted from the value of all assets • Accounting Equation • Equation showing the relationship among assets, liabilities and owner’s equity

  7. ( ) CHARACTER COUNTS Accounting Scandals Rock the Financial World • Ethics • The principles of right and wrong that guide an individual in making decisions • Business Ethics • The use of ethics in making business decisions

  8. End of Lesson REVIEW Completing The Accounting Equation WORK TOGETHER 1-1 Assets = Liabilities + Owner’s Equity ______ = 3,000 + 8,000 11,000 10,000 = _______ + 6,000 4,000 63,000 = 35,000 + ______ 28,000

  9. Assets = Liabilities + Owner’s Equity Receiving Cash = Kim Park, Capital Cash $0 $0 $0 + $ 5,000 + $ 5,000 $ 5,000 $0 $ 5,000

  10. Transaction • Business activity that changes assets, liabilities, or owner’s equity • Account • Record summarizing all information pertaining to a single item in the accounting equation • Account Title • The name given to an account • Account Balance • The amount/value in an account • Capital • Account used to summarize the owner’s equity

  11. Liabilities Owner’s Equity Assets = + $ 5,000 $0 $ 5,000 Paying Cash + Prepaid Insurance = Kim Park, Capital Cash + Supplies $0 $0 - 275 + 275 $ 4,725 $ 275 $0 $0 $ 5,000 - 1,200 + 1,200 $ 3,525 $ 275 $1,200 $0 $ 5,000

  12. Transactions on Account Liabilities Owner’s Equity Assets = + + Prepaid Insurance = Accts. Pay. Supply Depot + Kim Park, Capital Cash + Supplies $3,525 $ 775 $1,200 $ 500 $ 5,000 $3,525 $3,225 $ 275 $ 775 $1,200 $1,200 $ 200 $0 $ 5,000 $ 5,000 + 500 + 500 - 300 - 300

  13. Trans. No. End of Lesson REVIEW WORK TOGETHER 1-2 Determining how transactions change an accounting equation Assets = Liabilities + Owner’s Equity 1. + + 2. + + 3. - + - - 4.

  14. REVENUE TRANSACTIONS Liabilities Owner’s Equity Assets = + A/R Oakdale School A/P Supply Depot + + Prepaid Insurance = Kim Park, Capital Cash + Supplies + $3,225 $ 775 $1,200 $ 200 $ 5,000 $0 +295 +295 (revenue) $3,520 $0 $ 5,295 $ 775 $1,200 $ 200 +350 (revenue) +350 $3,520 $ 350 $ 775 $1,200 $ 200 $ 5,645 Total of left side: Total of right side: = = $3,520 $350 $775 $1,200 $200 $5,645 $5,845 + $5,845 + + +

  15. Revenue • Increase in owner’s equity resulting from the operation of the business • Sale on Account • Sale for which cash will be received at a later date • Expense • Decrease in owner’s equity resulting from the operation of a business • Withdrawals • Assets taken out of a business for the owner’s personal use

  16. Liabilities Owner’s Equity Assets = + EXPENSE TRANSACTIONS A/R Oakdale School A/P Supply Depot + Prepaid Insurance = Cash + Supplies + + Kim Park, Capital $3,520 $ 775 $1,200 $ 200 $ 5,645 $ 350 - 300 - 300 (expense) $3,220 $ 350 $ 5,345 $ 775 $1,200 $ 200 - 40 - 40 (expense) $3,180 $350 $ 775 $1,200 $ 200 $ 5,305 Total of left side: Total of right side: = = $350 $ 775 $1,200 $ 200 $ 5,305 $ 5,505 + $ 5,505 $3,180 + + +

  17. Liabilities Owner’s Equity Assets = + OTHER CASH TRANSACTIONS A/R Oakdale School A/P Supply Depot + + Prepaid Insurance = Kim Park, Capital Cash + Supplies + $3,180 $ 775 $1,200 $ 200 $ 5,305 $350 + 200 - 200 $3,380 $150 $ 5,305 $ 775 $1,200 $ 200 - 125 - 125 (withdrawal) $3,255 $150 $ 775 $1,200 $ 200 $ 5,180 Total of left side: Total of right side: = = $3,255 $150 $ 775 $1,200 $ 200 $ 5,180 $5,380 + $ 5,380 + + +

  18. Trans. No. End of Lesson REVIEW WORK TOGETHER 1-3 Determining how transactions change an accounting equation Assets = Liabilities + Owner’s Equity Accts. Rec – Bowman Co. Prepaid Insurance Accts. Pay- Maxwell Co. + + + = + Susan Sanders, Capital Cash Supplies 1. + + 2. + + 3. - - + - 4. - - 5.

  19. () EXPLORE ACCOUNTING What is GAAP? • Standards and rules accountants follow while recording and reporting financial activities. Written by FASB • Why is it necessary? • Users of financial statements rely on the information those statements contain. • Consistent methods allow users to be confident of the information’s validity.

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