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- 1. 1 - 1
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Accounting Concepts
Accounting Concepts
and Procedures:
and Procedures:
An Introduction
An Introduction
Chapter 1
Chapter 1
- 2. 1 - 2
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objective 1
Learning Objective 1
Defining and listing the
Defining and listing the
functions of accounting.
functions of accounting.
- 3. 1 - 3
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Accounting
Accounting
Managers
Managers
Owners
Owners
Investors
Investors
Government
Government
- 4. 1 - 4
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Sole Proprietorship
Sole Proprietorship
Partnership
Partnership
Corporation
Corporation
Categories of Business
Categories of Business
Organizations
Organizations
- 5. 1 - 5
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Types of Business
Types of Business
Organizations
Organizations
Ownership
Ownership Business owned by one person.
Business owned by one person.
Formation
Formation Easy to form.
Easy to form.
Owner could lose personal
Owner could lose personal
assets to meet obligations
assets to meet obligations
of business.
of business.
Liability
Liability
Closing
Closing
Ends with death of owner
Ends with death of owner
or closing of business.
or closing of business.
- 6. 1 - 6
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Types of Business
Types of Business
Organizations
Organizations
Business owned by
Business owned by
more than one person.
more than one person.
Ownership
Ownership
Easy to form.
Easy to form.
Formation
Formation
Ends with death of partner
Ends with death of partner
or exit of a partner.
or exit of a partner.
Closing
Closing
Partners could lose personal
Partners could lose personal
assets to meet obligations
assets to meet obligations
of partnership.
of partnership.
Liability
Liability
- 7. 1 - 7
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Types of Business
Types of Business
Organizations
Organizations
Business owned by stockholders.
Business owned by stockholders.
Ownership
Ownership
More difficult to form.
More difficult to form.
Formation
Formation
Can continue indefinitely.
Can continue indefinitely.
Closing
Closing
Limited personal risk.
Limited personal risk.
Stockholders’ loss is limited to
Stockholders’ loss is limited to
their investment in the company.
their investment in the company.
Liability
Liability
- 8. 1 - 8
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Classifying
Classifying
Business Organizations
Business Organizations
Service
Service businesses provide services.
businesses provide services.
Merchandise
Merchandise businesses sell products.
businesses sell products.
Manufacturing
Manufacturing businesses make products.
businesses make products.
- 9. 1 - 9
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Definition of Accounting
Definition of Accounting
Accounting is the process that...
Accounting is the process that...
analyzes,
analyzes,
records,
records,
classifies,
classifies,
summarizes,
summarizes,
reports, and...
reports, and...
interprets financial information.
interprets financial information.
- 10. 1 - 10
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objective 2
Learning Objective 2
Recording transactions in the
Recording transactions in the
basic accounting equation.
basic accounting equation.
- 11. 1 - 11
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-1
Learning Unit 1-1
(The Accounting Equation)
(The Accounting Equation)
Assets are the
Assets are the
items owned by
items owned by
the business.
the business.
Equities are
Equities are
the claims
the claims
against the
against the
assets.
assets.
- 12. 1 - 12
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-1
Learning Unit 1-1
(The Accounting Equation)
(The Accounting Equation)
Liabilities are
Liabilities are
the creditor’s
the creditor’s
equity.
equity.
Owner’s equity
Owner’s equity
is the rights
is the rights
of ownership.
of ownership.
- 13. 1 - 13
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-1
Learning Unit 1-1
(The Accounting Equation)
(The Accounting Equation)
Assets
Assets
– Liabilities
Liabilities
=
Owner’s
Owner’s
Equity
Equity
- 14. 1 - 14
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-1
Learning Unit 1-1
(The Accounting Equation)
(The Accounting Equation)
A. August 28: Cathy Hall invested
A. August 28: Cathy Hall invested
$7,000 in cash and $800 of office
$7,000 in cash and $800 of office
equipment into the business.
equipment into the business.
B. August 29: Law practice buys
B. August 29: Law practice buys
office equipment for cash $900.
office equipment for cash $900.
C. August 30: Buys additional
C. August 30: Buys additional
office equipment on account $400.
office equipment on account $400.
- 15. 1 - 15
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-1
Learning Unit 1-1
(The Accounting Equation)
(The Accounting Equation)
$8,200 = $8,200
$8,200 = $8,200
a)
a) Cash
Cash +
+ $7,000
$7,000 +
+ $7,800
$7,800
a) Equipment
a) Equipment +
+ 800
800
b)
b) Cash
Cash –
– 900
900
Equipment
Equipment +
+ 900
900
Equipment
Equipment +
+ 400
400 +
+ 400
400
Assets
Assets =
= Liabilities
Liabilities +
+
Owner’s
Owner’s
Equity
Equity
- 16. 1 - 16
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-1
Learning Unit 1-1
(Shift in Assets)
(Shift in Assets)
The makeup of the assets has
The makeup of the assets has
changed, but the total of the
changed, but the total of the
assets remains the same.
assets remains the same.
- 17. 1 - 17
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-2
Learning Unit 1-2
(The Balance Sheet)
(The Balance Sheet)
The balance sheet shows the company’s
The balance sheet shows the company’s
financial position as of a particular date.
financial position as of a particular date.
Company name
Company name
Name of the statement
Name of the statement
Date
Date
- 18. 1 - 18
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-2
Learning Unit 1-2
(The Balance Sheet)
(The Balance Sheet)
Cathy Hall, Attorney-at-Law
Cathy Hall, Attorney-at-Law
Balance Sheet
Balance Sheet
August 31, 200x
August 31, 200x
Assets
Assets
Cash
Cash $6,100
$6,100
Equipment
Equipment 2,100
2,100
Total
Total $8,200
$8,200
Liabilities and Owner’s Equity
Liabilities and Owner’s Equity
Accounts Payable
Accounts Payable $ 400
$ 400
Owner’s Equity
Owner’s Equity
Cathy Hall, Capital
Cathy Hall, Capital 7,800
7,800
Total
Total $8,200
$8,200
- 19. 1 - 19
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Seeing how revenue, expenses,
Seeing how revenue, expenses,
and withdrawals expand the
and withdrawals expand the
basic accounting equation.
basic accounting equation.
Learning Objective 3
Learning Objective 3
- 20. 1 - 20
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-3 (The
Learning Unit 1-3 (The
Accounting
Accounting
Equation Expanded)
Equation Expanded)
An expanded accounting equation
An expanded accounting equation
includes the following:
includes the following:
Revenues (cash, accounts receivable)
Revenues (cash, accounts receivable)
Expenses
Expenses
Withdrawals
Withdrawals
- 21. 1 - 21
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-3 (The
Learning Unit 1-3 (The
Accounting
Accounting
Equation Expanded)
Equation Expanded)
Revenues
Revenues
Net income or
Net income or
Net loss
Net loss
– =
Expenses
Expenses
- 22. 1 - 22
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-3 (The
Learning Unit 1-3 (The
Accounting Equation Expanded)
Accounting Equation Expanded)
Beginning
Beginning
capital
capital
PLUS
PLUS
Additional
Additional
investment
investment
Net income
Net income Withdrawals
Withdrawals
+ –
- 23. 1 - 23
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-3 (The
Learning Unit 1-3 (The
Accounting Equation Expanded)
Accounting Equation Expanded)
D. September 1-30: Cathy Hall provided
D. September 1-30: Cathy Hall provided
legal services for cash, $3,000.
legal services for cash, $3,000.
E. September 1-30: Provided legal
E. September 1-30: Provided legal
services on account, $4,000.
services on account, $4,000.
F. September 1-30: Received $700
F. September 1-30: Received $700
cash as partial payment from previous
cash as partial payment from previous
services performed on account.
services performed on account.
G. September 1-30 paid salaries expense, $600.
G. September 1-30 paid salaries expense, $600.
- 24. 1 - 24
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-3 (The
Learning Unit 1-3 (The
Accounting Equation Expanded)
Accounting Equation Expanded)
H. September 1-30: Paid rent expense, $700.
H. September 1-30: Paid rent expense, $700.
I. September 1-30: Incurred advertising
I. September 1-30: Incurred advertising
expenses of $300, to be paid next month.
expenses of $300, to be paid next month.
J. September 1-30: Cathy
J. September 1-30: Cathy
withdrew $200 for personal use.
withdrew $200 for personal use.
- 25. 1 - 25
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objective 4
Learning Objective 4
Preparing an income
Preparing an income
statement, a statement
statement, a statement
of owner’s equity,
of owner’s equity,
and a balance sheet.
and a balance sheet.
- 26. 1 - 26
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-4 (Preparing
Learning Unit 1-4 (Preparing
Financial Statements)
Financial Statements)
Cathy Hall, Attorney-at-Law
Cathy Hall, Attorney-at-Law
Income Statement
Income Statement
For Month Ended September 30, 200x
For Month Ended September 30, 200x
Revenue:
Revenue:
Legal fees
Legal fees $7,000
$7,000
Operating expenses:
Operating expenses:
Salaries expense
Salaries expense $600
$600
Rent expense
Rent expense 700
700
Advertising expense
Advertising expense 300
300 1,600
1,600
Net income
Net income $5,400
$5,400
- 27. 1 - 27
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-4 (Preparing
Learning Unit 1-4 (Preparing
Financial Statements)
Financial Statements)
Cathy Hall, Attorney-at-Law
Cathy Hall, Attorney-at-Law
Statement of Owner’s Equity
Statement of Owner’s Equity
For Month Ended September 30, 200x
For Month Ended September 30, 200x
Cathy Hall, Capital, Sept. 1, 200x
Cathy Hall, Capital, Sept. 1, 200x $ 7,800
$ 7,800
Net Income for Sept.
Net Income for Sept. $5,400
$5,400
Less Withdrawals for Sept.
Less Withdrawals for Sept. 200
200
Increase in Capital
Increase in Capital 5,200
5,200
Cathy Hall, Capital, Sept. 30, 200x
Cathy Hall, Capital, Sept. 30, 200x $13,000
$13,000
- 28. 1 - 28
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-4 (Preparing
Learning Unit 1-4 (Preparing
Financial Statements)
Financial Statements)
Cathy Hall, Attorney-at-Law
Cathy Hall, Attorney-at-Law
Balance Sheet
Balance Sheet
September 30, 200x
September 30, 200x
Assets
Assets Liabilities and Owner’s Equity
Liabilities and Owner’s Equity
Accounts Payable
Accounts Payable $ 700
$ 700
Owner’s Equity
Owner’s Equity
Cathy Hall, Capital
Cathy Hall, Capital 13,000
13,000
Total
Total $13,700
$13,700
- 29. 1 - 29
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Generally Accepted
Generally Accepted
Accounting Principles (GAAP)
Accounting Principles (GAAP)
These are the procedures and guidelines
These are the procedures and guidelines
that must be followed during
that must be followed during
the accounting process.
the accounting process.
- 30. 1 - 30
© 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
End of Chapter 1
End of Chapter 1
