1 - 1 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

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Accounting Concepts
and Procedures:
An Introduction
Chapter 1
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Accounting
Managers
Owners
Investors
Government
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Sole Proprietorship
Partnership
Corporation
Categories of Business
Organizations
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Types of Business
Organizations
Ownership Business owned by one person.
Formation Easy to form.
Owner could lose personal
assets to meet obligations
of business.
Liability
Closing
Ends with death of owner
or closing of business.
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Types of Business
Organizations
Business owned by
more than one person.
Ownership
Easy to form. Formation
Ends with death of partner
or exit of a partner.
Closing
Partners could lose personal
assets to meet obligations
of partnership.
Liability
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Types of Business
Organizations
Business owned by stockholders. Ownership
More difficult to form. Formation
Can continue indefinitely. Closing
Limited personal risk.
Stockholders loss is limited to
their investment in the company.
Liability
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Classifying
Business Organizations
Service businesses provide services.
Merchandise businesses sell products.
Manufacturing businesses make products.
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Definition of Accounting
Accounting is the process that...
Identifies,
analyzes,
records,
classifies,
summarizes,
reports, and...
interprets financial information.
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Learning Unit 1-1
(The Accounting
Equation)
Assets are the
items owned by
the business.
Equities are
the claims
against the
assets.
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Learning Unit 1-1
(The Accounting
Equation)
Liabilities are
the creditors
equity.
Owners equity
is the rights
of ownership.
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Learning Unit 1-1
(The Accounting
Equation)
Assets

Liabilities
=
Owners
Equity
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Learning Unit 1-1
(The Accounting
Equation)
A. August 28: Cathy Hall invested
$7,000 in cash and $800 of office
equipment into the business.
B. August 29: Law practice buys
office equipment for cash $900.
C. August 30: Buys additional
office equipment on account $400.
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Learning Unit 1-1
(The Accounting
Equation)
$8,200 = $8,200
a) Cash + $7,000 + $7,800
a) Equipment + 800
b) Cash 900
Equipment + 900
Equipment + 400 + 400
Assets = Liabilities +
Owners
Equity
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Learning Unit 1-1
(Shift in Assets)
The makeup of the assets has
changed, but the total of the
assets remains the same.
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Learning Unit 1-2
(The Balance Sheet)
The balance sheet shows the companys
financial position as of a particular date.
Company name
Name of the statement
Date
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Learning Unit 1-2
(The Balance Sheet)
Cathy Hall, Attorney-at-Law
Balance Sheet
August 31, 200x
Assets
Cash $6,100
Equipment 2,100

Total $8,200
Liabilities and Owners Equity
Accounts Payable $ 400
Owners Equity
Cathy Hall, Capital 7,800
Total $8,200
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Learning Unit 1-3 (The
Accounting
Equation Expanded)
An expanded accounting equation
includes the following:
Revenues (cash, accounts receivable)
Expenses
Withdrawals
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Learning Unit 1-3 (The
Accounting
Equation Expanded)
Revenues
Net income or
Net loss
=
Expenses
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Learning Unit 1-3 (The
Accounting Equation
Expanded)
Beginning
capital
PLUS
Additional
investment
Net income Withdrawals +
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Learning Unit 1-3 (The
Accounting Equation
Expanded)
D. September 1-30: Cathy Hall provided
legal services for cash, $3,000.
E. September 1-30: Provided legal
services on account, $4,000.
F. September 1-30: Received $700
cash as partial payment from previous
services performed on account.
G. September 1-30 paid salaries expense, $600.
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Learning Unit 1-3 (The
Accounting Equation
Expanded)
H. September 1-30: Paid rent expense, $700.
I. September 1-30: Incurred advertising
expenses of $300, to be paid next month.
J. September 1-30: Cathy
withdrew $200 for personal use.
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Learning Unit 1-4
(Preparing Financial
Statements)
Cathy Hall, Attorney-at-Law
Income Statement
For Month Ended September 30, 200x
Revenue:
Legal fees $7,000
Operating expenses:
Salaries expense $600
Rent expense 700
Advertising expense 300 1,600

Net income $5,400
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Learning Unit 1-4
(Preparing Financial
Statements)
Cathy Hall, Attorney-at-Law
Statement of Owners Equity
For Month Ended September 30, 200x
Cathy Hall, Capital, Sept. 1, 200x $ 7,800
Net Income for Sept. $5,400
Less Withdrawals for Sept. 200
Increase in Capital 5,200
Cathy Hall, Capital, Sept. 30, 200x $13,000
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Learning Unit 1-4
(Preparing Financial
Statements)
Cathy Hall, Attorney-at-Law
Balance Sheet
September 30, 200x
Assets
Cash $ 8,300
Accts. Rec. 3,300
Equipment 2,100
Total $13,700
Liabilities and Owners Equity
Accounts Payable $ 700
Owners Equity
Cathy Hall, Capital 13,000
Total $13,700
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Generally Accepted
Accounting Principles
(GAAP)
These are the procedures and guidelines
that must be followed during
the accounting process.
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End of Chapter 1