Chapter 1 Balance Sheet Accounts. Big Ideas Define accounting terms related to starting a service...
-
Upload
samuel-goodwin -
Category
Documents
-
view
223 -
download
4
Transcript of Chapter 1 Balance Sheet Accounts. Big Ideas Define accounting terms related to starting a service...
Big Ideas
• Define accounting terms related to starting a service business organized as a proprietorship
• Identify accounting concepts and practices related to starting a service business organized as a proprietorship
• Classify accounts as assets, liabilities, or owner’s Equity and demonstrate their relationships in the accounting equation
Big Ideas cont’d
• Analyze how transactions related to starting a service business organized as a proprietorship affect accounts in an accounting equation
• Prepare a balance sheet for a service business organized as a proprietorship from information in an accounting equation
What is Accounting?
• Planning recording analyzing, and interpreting financial information
• Who uses accounting? – Owners
– Managers
– Accounting personnel
• Why– To understand the information in accounting reports in
order to help themselves make better business decisions
The Business Entity
• A service business is a business that performs an activity for a fee
• A Proprietorship is a business owned by one person
Review 1
• What is accounting?• Planning recording analyzing, and
interpreting financial information • What is a service business?• A business that performs an activity for a
fee • What is a proprietorship?• A business owned by one person
The Accounting Equation
• Assets = Liabilities + Owner’s Equity
• Assets are anything that a business owns
• Liabilities are what a business owes
• Owner’s Equity is nothing more that the difference between what is owned and what is owed by a business
Review 2
• What are Assets?• Anything that a business owns • What are Liabilities?• What a business owes • What is Owner’s Equity?• The difference between what is owned and what is
owed by a business • What is the Accounting Equation?• Assets= Liabilities + Owner’s Equity
Receiving Cash
• A transaction is defined as a business activity that changes assets, liabilities, or owner’s equity
• Accounts are defined as records that summarize all of the information pertaining to a single item in the accounting equation
• An account title is the name given to an account
RECEIVING CASH
Lesson 1-2, page 9Lesson 1-2, page 9
Transaction 1 August 1. Received cash from owner as an investment, $10,000.00.
PAYING CASH
Lesson 1-2, page 10Lesson 1-2, page 10
Transaction 2 August 3. Paid cash for supplies, $1,577.00.
Transaction 3 August 4. Paid cash for insurance, $1,200.00.
TRANSACTIONS ON ACCOUNT
Lesson 1-2, page 11Lesson 1-2, page 11
Transaction 4 August 7. Bought supplies on account from Ling Music Supplies, $2,720.00.
Transaction 5 August 11. Paid cash on account to Ling Music Supplies, $1,360.00.
Review 3
• What is a transaction?
• A business activity that changes assets, liabilities, or owner’s equity
• What is an account?
• Records that summarize all of the information pertaining to a single item in the accounting equation
Review 4
• What is an account title?
• The name given to an account
• What is an account balance?
• The amount in an account
• What is capital?
• The account used to summarize the owner’s equity in a business
Reporting Financial Information
• A balance sheet is a financial statement that reports assets, liabilities, and owner’s equity
5. Add amounts and
compare the totals.
PREPARING A BALANCE SHEET
Lesson 1-3, page 14Lesson 1-3, page 14
5
1
3
4
2
76
1. Write the heading.2. Prepare the assets
section.
3. Prepare the liabilities section.
4. Prepare the owner’s equity section.
6. Rule single lines.7. Write the totals.
8. Rule double lines.8
Review 5
• What is a Balance Sheet?
• A way of showing a company’s financial health at a period in time
• List the three sections of a Balance Sheet
• Assets
• Liabilities
• Owner’s Equity