Chapter 17.2
Accounting
Accounting
›  The
systematic process of recording and
reporting the financial position of a person
or an organization.
›  Keeping
track of the money that you
spend and receive!
›  Accountant
Rules for Accountants
›  Generally
Accepted Accounting
Principles (GAAP)
›  Financial
reports – summarized financial
information about the financial status of a
business.
Property
›  Anything
of value that is owned or
controlled.
Assets and Current Assets
›  Property
›  Assets
and other items of value
converted to cash during the
normal cycle (1 year or less)
Asset-Accounts Receivable
›  Total
amount of money owed to a
business
›  Money
credit
received in payments – sold on
Fixed Assets
›  Items
of value that will be held for more
than one year (not converted).
›  Equipment,
buildings
›  “Equity”
›  One
year or more!
Liabilities
›  Creditors
claims to assets of a business
›  Debts
›  Measured
by amount of money owed to
creditors.
›  Accounts Payable – short term liabilities
owed to creditors
The Accounting Equation
›  Assets
›  Both
= Liabilities + Owner’s Equity
sides must always be in balance.
Financial Statements
›  Summarize
the changes from business
transactions
›  Income
Statement – Revenue, expenses
›  Balance Sheet – assets, liabilities, OE
›  Statement of Cash Flows – incoming and
outgoing money