ACCOUNTING & ACCOUNTING SYSTEMS • P R A I • Planning • Recording • Analyzing • Interpreting financial information • Accounting System • A planned process for providing financial information that will be useful to management
ACCOUNTING RECORDS & SERVICE BUSINESS • Accounting Records • Organized summaries of a business’s financial activities. • Service Business • A business that performs an activity for a fee • EXAMPLES: Laundry service, house cleaning, landscaping, etc.
PROPRIETORSHIP • A business owned and operated by one person • ENCORE MUSIC
ASSETS & LIABILITIES • ASSETS • Anything of value that is owned • Example: • Personal assets - Car, house, clothing, etc. • Business assets – Cash, Supplies and Prepaid Insurance • LIABILITIES • An amount that a business owes • Example: • Personal liability – Credit cards, mortgage, etc. • Business liability – Buying supplies on account (credit)
EQUITIES & OWNER’S EQUITY • Equities • Financial rights to the assets of a business • Business has two types of equity • Equity of those to whom money is owed • Example: Encore Music buys supplies and agrees to pay for them at a later time. (Credit) • Equity of the owner • Example: Owner of Encore Music invests personal money to start her business. • Owner’s Equity • The amount remaining after the value of all liabilities is subtracted from the value of all assets.
THE ACCOUNTING EQUATION Lesson 1-1, page 7
TERMS REVIEW accounting accounting system accounting records service business proprietorship asset equities liability owner’s equity accounting equation Lesson 1-1, page 8