do now: complete the survey on my desk when finished, take: 2 textbooks 1 working papers workbook ...

DO NOW:

Complete the Survey on my desk

When finished, take: 2 textbooks 1 Working Papers workbook

on the side bookshelf 1 Obligation form

Preview your books

Housekeeping

Textbook Online Activities

Preview Xtra for online activities

The Accounting Equation

Chapter 1 Starting a Proprietorship:Changes That Affect the Accounting Equation

What is accounting?(4 important definitions to understand accounting)

Accounting is planning, recording, analyzing, and interpreting financial information.

Accounting system is a planned process for providing financial information that will be useful to management.

Accounting records are organized summaries of business financial activities.

Financial statements are financial reports that summarize the financial conditions and operations of a business.

Accounting is the language of business

The Language of Business

Why study accounting?

Why study accounting?

Consistently ranked among the best jobs in America

The Accounting Profession

What do accountants do? Your first job usually at a public accounting firm

Deloitte Touche Tohmatsu Ernst & Young KPMG PricewaterhouseCoopers

Move on to careers with an accounting focus in business or government

Can move into partnership in a firm, Chief Financial Officer

Careers in accounting - Activity

Read and Pass activity:

Read the article on a type of accountant, take notes

Pass your article on, and take the next article

When all articles are read, discuss the different types of accountants in your group. Decide which type might be the best fit for you.

The business we’ll work with…

TechKnow

Proprietorship (sole proprietorship) – a business owned by one person.

Service business – a business that performs an activity for a fee

Proprietorship

Why might a business organize as a proprietorship? Because the owner retains TOTAL

control of the company. Characteristics of a proprietorship

Owner is personally responsible for the debts of the proprietorship.

Owner has sole authority to act for the proprietorship.


Assets = Liabilities + Owner’s Equity

The accounting equation

Assets Anything of value that is owned.

Ex. Cash to buy supplies for the business.

Liabilities The amount owed by a business

Ex. Money borrowed from banks

Owner’s Equity Owner’s interest in the business


The equation shows the relationship among items of value a business has and the financial rights to the item.

The equation must always have equal amounts on each side.

The equation is made up of assets, liabilities, and owner’s equity.


Assets = Liabilities + Owner’s Equity A business has assets of $100,000 and

liabilities of $60,000. What is the owner’s equity?

$100,000 = $60,000 + ? ? = $40,000 The equation would be…..

$100,000 = $60,000 + $40,000


Work Together, p. 9

Complete the blanks to balance the accounting equation.

Read about TechKnow Consulting’s accounting equation on p. 8

Assets, liabilities, and owner’s equity accounts

Accounting Basics Lesson 4: Assets, Liabilities, Owner's Equity, Accounts Payable. danieldickson2 10 videos Subscribe Subscribed

Assets, liabilities and owner’s equity

Activity – Work in partnerships and classify the account titles as assets, liabilities or owner’s equity

What changes the Accounting Equation?

Transactions

Business activities that change the accounting equation are called transactions.

After each transaction the accounting equation must remain in balance.

Cash Transactions

Receiving Cash


Cash = Kim Park, Captial

$ 0 $ 0 $ 0

TechKnow owner Kim Park uses $5,000 of her own moneyTo invest in TechKnow. P. 11

Cash (Asset) is increased by $5000, Kim Park, Capital Acct (OE) is increased by $5,0000


+ +

$5000 = $ 0 + $5000

+5,000 _________ +5000

Paying Cash


Cash Supplies Kim Park, Capital

$5000 = $0 + $5000

TechKnow owner Kim Park uses $275 of TechKnow’s cashTo buy supplies. P. 11

- 275 + 275 ______ ______

$4725 $ 275 = $ 0 + $5000

Cash (Asset) is decreased by $275, Supplies (Asset) is increased by $275


-, +

Paying Cash for Insurance

Assets = Liabilities + OE

Cash Supplies Prepaid Insurance

Kim Park, Capital

$4725 $ 275 $0 = $0 + $5000

TechKnow owner Kim Park uses $1,200 of TechKnow’s cashto pay her insurance premium for a year’s worth of insurance. She’s prepaying for insurance that she’ll have for the year. P. 11


-, +

-1200 _____ +1200 ______ ______

$3525 $ 275 $1200 = $ 0 + $5000

Cash (Asset) is decreased by $1200, Prepd Insurance (Asset) is increased by $275

On Account Transactions

We think of it as ‘charging’ something. We put the purchase ‘on account’ with the vendor. We later pay ‘on account’, and pay off what we owe.

Buying Supplies on Account



Accts Payable, Supply Depot

Kim Park,Capital

$3525 $ 275 $1200 = $ 0 + $5000

TechKnow needs supplies, and arranges to pay for them at theend of the month. p. 12

+ 500 $ + 500 ______

$3525 $ 775 $1200 = $ 500 + $5000

Supplies (Asset) is increased by $500, Supply Depot (Liabilities) is increased by $500


+ +

Paying Cash for Supplies on Account




Kim Park,Capital

$3525 $ 775 $1200 = $ 500 + $5000

TechKnow has to pay a portion of the supply costs. (New businesses don’t have a positive credit profile yet, so they get very limited terms for repayment.) p. 12

- 300 - 300 ______

$3225 $ 775 $1200 = $ 200 + $5000

Supplies (Asset) is increased by $500, Supply Depot (Liabilities) is increased by $500


- -

In Summary, to balance your accounting equation:

If transactions are on both sides of the equal sign, add or subtract both. + = + or - = -

If transactions occur on one side of the = sign, add and subtract on that side. +,- = or -,+ = or = +,- or = -+

PRACTICE

Determine how transactions change an accounting equation.

Work Together 1-2 Txtbk p. 13, Working Papers p. 7

On Your Own 1-2 Txtbk p. 13, Working Papers, p. 8

Received Cash from Sales


Cash Accts Rec – Oakdale school

Supplies Prepaid Insurance


Kim Park,Capital

$3225 $ 775 $1200 = $ 200 + $5000

TechKnow receives cash for from sales, $295. Revenue is earned. p. 14

+ 295 + 295

$3520 $ 775 $1200 = $ 200 + $5295

Cash (Asset) is increased by $295, Kim Park, Capital (OE) is increased by $295


+ +

Sold Services on Account




Accts Payable,Supply Depot

Kim Park,Capital

$3520 $ 775 $1200 = $ 200 + $5295

TechKnow makes a sale, but won’t receive cash for it until later. It’s a charge sale, or sale on account. $350. Revenue is earned. p. 14

+350 +350

$3520 $350 $ 775 $1200 = $ 200 + $5645

Accts Rec (Asset) is increased by $350, Kim Park, Capital (OE) is increased by $350


+ +

Paid Cash for Rent




Accts Payable Supply Depot

Kim Park,Capital

$3520 $ 300 $ 775 $1200 = $ 200 + $5295

Techknow pays cash for rent, $300. p. 15

-300 - 300

$3220 $350 $ 775 $1200 = $ 200 + $5345

Cash(Asset) is decreased by $300, Kim Park, Capital (OE) is decreased by $300


- -

Paid cash for Phone Bill





Kim Park,Capital

$3220 $ 300 $ 775 $1200 = $ 200 + $5345

Techknow pays cash for a phone bill, $40. p. 15

-40 -40

$3180 $350 $ 775 $1200 = $ 200 + $5305



- -

Paid cash on Account





Kim Park,Capital

$3180 $ 300 $ 775 $1200 = $ 200 + $5305

Techknow receives cash on account from Oakdale School, $200. p. 16

+200 -$200

$3380 $150 $ 775 $1200 = $ 200 + $5305

Cash(Asset) is increased by $200, Accts Rec, Oakdale School (Assets) is decreased by $200


+, -

Paid cash to owner for personal use





Kim Park,Capital

$3380 $ 150 $ 775 $1200 = $ 200 + $5305

Techknow’s owner, Kim Park, withdrawals $125 for personal use. p. 16

-125 - 125

$3255 $150 $ 775 $1200 = $ 200 + $5180



- -

PRACTICE

Work Together 1-3 Txtbk, p. 17 Working Papers, p. 9

On Your Own 1-3 Txtbk, p. 17 Working papers, p. 10

**Chapter 1 Test –

Wednesday, September 19th

do now: complete the survey on my desk when finished, take: 2 textbooks 1 working papers workbook ...

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