LESSON 1-1

1. LESSON 1-1 The Accounting Equation Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School

2. What is Accounting? Planning, recording, analyzing, & interpreting financial information (also known as the language of business) In order to do this, you must have some type of LESSON 1-1

3. Accounting System A planned process for providing financial information that will be useful to management Consisting of LESSON 1-1

4. Accounting Records To organize summaries of a business’s financial activities You will use these to create LESSON 1-1

5. Financial Statements Financial reports that summarize the financial condition and operations of a business LESSON 1-1

6. Business Entity – A business’s financial information is recorded and reported separately from the owner’s personal financial information. The Business – Techknow Consulting page 6 LESSON 1-1

7. The Business – Techknow Consulting page 6 A business that performs an activity for a fee Service Business Sole Proprietor-ship A business owned by one person LESSON 1-1

8. THE ACCOUNTING EQUATION page 8 • The Accounting Equation shows the relationship among assets, liabilities, & owner’s equity It is most often stated as: Assets = Liabilities + Owner’s Equity LESSON 1-1

9. THE ACCOUNTING EQUATION page 8 • Asset– anything of value that is owned by the business • Liability – an amount owed by a business • Equities – financial rights to the assets of a business • Equity of those to whom money is owed • Equity of the owner • Owner’s Equity – the amount remaining after the value of all liabilities is subtracted from the value of all assets LESSON 1-1

10. THE ACCOUNTING EQUATION page 8 LESSON 1-1

11. accounting accounting system accounting records financial statements service business proprietorship asset equities liability owner’s equity accounting equation ethics business ethics TERMS REVIEW page 9 LESSON 1-1