Chapter 1
Starting a Proprietorship
Terms that you need to know
 Accounting
 Planning
recording analyzing and
interpreting financial information
 Accounting
A
System
process for providing financial
information that will be useful to
management

Accounting Records


Organized summaries of a business’s financial
activities
Assets

Anything of value that is owned



Financial rights to the assets of a business
Liabilities

An amount owed by a business


Insurance
Equities


Cash
Supplies
Any business that we buy something from
Owner’s Equity


The amount remaining after the value of all
liabilities subtracted from the value of all assets
(Owner’s Name), Capital Account
The accounting equation
 Property
 Assets
= Credit + Equity
= Liability + Owner’s Equity
$15,000
$8000
$7000
How the accounting equation
changes
Assets
Equity
= Liability + Owner’s
More terms
 Transaction
A
business activity that changes asset’s,
liabilities , or owner’s equity
 Account
 Each
transaction effects at least 2
accounts
 Account
 Each
Title
account has its own title
 Each
account has a ACCOUNT
BALANCE
 Each
 Capital
 The
balance should be a positive number
Account
account that summarizes the owner’s
equity
Work together page 9
Assets
?
10000
63000
=
Liability + Owners Equit
3000
8000
?
6000
35000
?
Now you do On your own………….
Section 2
 How
business activities change the
accounting equation
Remember the accounts
ASSETS
Cash
Supplies
Prepaid Insurance
=
Liabilities + Owners Equity
Accts Pay –
Name of
Company
Name of Owner,
Capital
Transaction #1
August 1. Received cash from owner as an investment, $10,000.
Assets
Cash
= Liability + Owner’s Equity
Barbara Trevino, Cap
$10,000
$10,000
Do Assets = Liabilities + Owner’s Equity?
Transaction #2
August 3. Paid cash for Supplies $1577.
Assets
Cash
$10,000
$1577
Supplies
= Liability + Owner’s Equity
Barbara Trevino, Cap
$10,000
$1577
Do Assets = Liabilities + Owner’s Equity?
Transaction #3
August 4 Paid cash for insurance $1,200
Assets
= Liability + Owner’s Equity
Cash Supplies Prepaid Ins
$10,000
$1577
$1577
$1200
$7223
1577
Barbara Trevino, Cap
$10,000
$1200
1200
Do Assets = Liabilities + Owner’s Equity?
10,000
Transaction #4
August 7 Bought supplies on account from Ling Music Supplies $2,720
Assets
=
Cash Supplies Prepaid Ins
$10,000
$1577
$1577
$1200
$2720
Liability + Owner’s Equity
Acct Pay
Ling Music
Supplies
Barbara Trevino, Cap
$1200
$2720
Do Assets = Liabilities + Owner’s Equity?
$10,000
Transaction #5
August 11. Paid cash on account to Ling Music Supplies $1360
Assets
=
Cash Supplies Prepaid Ins
$10,000
$1577
$1577
$1200
$2720
$1360
Liability + Owner’s Equity
Acct Pay
Ling Music
Supplies
Barbara Trevino, Cap
$1200
$2720
$1360
Do Assets = Liabilities + Owner’s Equity?
$10,000
Work Together Page 13
Trans
No Assets =
Liabilities + Owners Equity
 Now
work on your own on page 12
 Please check the answers with me or
the key in the back of the room.
Chapter 1 Section 3
Preparing a Balance Sheet
Transaction #5
August 11. Paid cash on account to Ling Music Supplies $1360
Assets
=
Cash Supplies Prepaid Ins
$10,000
$1577
$1577
$1200
Barbara Trevino, Cap
$10,000
$2720
$1360
$1360
$4297
Acct Pay
Ling Music
Supplies
$1200
$2720
$5863
Liability + Owner’s Equity
$1200
$1360
Do Assets = Liabilities + Owner’s Equity?
$10000
How Transactions Change Owner’s
Equity in an Accounting Equation
– is the amount of money the
company generates from the sale of goods.
Revenue
Received Cash from Sales
 Transaction
August
Assets
#6
12 Received cash from sales, $325
=
Liabilities + Owner's Equity
A/R Kids
Prepaid A/P - Ling Barbara Trevino,
Cash
Time Supplies Insurance Music
Capital
5863
0
4297
1200
1360
10000
325
325 revenue
6188
0
4297
1200
1360
10325
Totals
Received Cash from Sales
 Transaction
August
#7
12, sold services on account to Kids time
Assets
=
Liabilities
+ Owner's Equity
A/R Kids
Prepaid A/P - Ling Barbara Trevino,
Cash
Time
Supplies Insurance Music
Capital
5863
0
4297
1200
1360
10000
325
325 revenue
200
200 revenue
6188
200
4297
1200
1360
10525
Totals
total
11885
total
11885
Received Cash from Sales
 Transaction
August
#7
12, sold services on account to Kids time
Assets
=
Liabilities
+ Owner's Equity
A/R Kids
Prepaid A/P - Ling Barbara Trevino,
Cash
Time
Supplies Insurance Music
Capital
5863
0
4297
1200
1360
10000
325
325 revenue
200
200 revenue
6188
200
4297
1200
1360
10525
Totals
total
11885
total
11885
Received Cash from Sales
 Transaction
August
#8
12 Paid cash for rent, $250.00
Assets =
Liabilities + Owner's Equity
A/R Kids
Prepaid A/P - Ling Barbara Trevino,
Cash
Time
Supplies Insurance
Music
Capital
5,863.00
0.00 4,297.00 1,200.00 1,360.00
10,000.00
325.00
325.00 revenue
200.00
200.00 revenue
(250.00)
(250.00) expenses
5,938.00
200.00 4,297.00 1,200.00 1,360.00
10,275.00
Totals
total
11,635.00
total
11,635.00
Received Cash from Sales
 Transaction
August
#9
12 Paid cash for telephone bill,$45.00
Assets =
Liabilities + Owner's Equity
A/R Kids
Prepaid A/P - Ling Barbara Trevino,
Cash
Time
Supplies Insurance Music
Capital
5,863.00
0.00 4,297.00 1,200.00 1,360.00
10,000.00
325.00
325.00
200.00
200.00
(250.00)
(250.00)
(45.00)
(45.00)
5,893.00
200.00 4,297.00 1,200.00 1,360.00
10,230.00
total
11,590.00
total
11,590.00
revenue
revenue
expenses
expenses
Totals
Received Cash from Sales
 Transaction
August
#10
12 Received cash on account from Kids Time
$100.
Assets =
Liabilities + Owner's Equity
A/R Kids
Prepaid A/P - Ling Barbara Trevino,
Cash
Time
Supplies Insurance Music
Capital
5,863.00
0.00 4,297.00 1,200.00 1,360.00
10,000.00
325.00
325.00
200.00
200.00
(250.00)
(250.00)
(45.00)
(45.00)
100.00 (100.00)
5,993.00
100.00 4,297.00 1,200.00 1,360.00
10,230.00
total
11,590.00
total
11,590.00
revenue
revenue
expenses
expenses
Totals
Received Cash from Sales
 Transaction
August
#11
12. Paid cash to owner for personal use $100.00
Assets =
Liabilities + Owner's Equity
A/R Kids
Prepaid A/P - Ling Barbara Trevino,
Cash
Time
Supplies Insurance Music
Capital
5,863.00
0.00 4,297.00 1,200.00 1,360.00
10,000.00
325.00
325.00
200.00
200.00
(250.00)
(250.00)
(45.00)
(45.00)
100.00
(100.00)
(100.00)
(100.00)
5,893.00
100.00 4,297.00 1,200.00 1,360.00
10,130.00
total
11,490.00
total
11,490.00
revenue
revenue
expenses
expenses
expenses
withdrawl
Totals
Review of Chapter 1

Definition of Accounting
 Defined important vocab terms




Asset
Liability
Owners Equity
Discussed the Accounting Equation
 Saw the relationship between the Accounting
Equation and Transactions
 Learned how to create a balance sheet
Can you do this transaction
 Received
Cash from owner, Mr. Parks
as investment $10,000
 Bought supplies with Cash $2000
 Bought supplies on Account – Mr.
Prosser Supplies $1000
 Paid cash on Account – Mr. Prosser
$500
Assets
CASH
$10,000
=
Supplies
$2000
$2000
$8000
$2000
$8000
+ Owners Eq
Accts Pay- Mr.
Parks
Mr. Parks, Capital
$10,000
$10,000
$1000
$1000
$3000
$1000
$500
$10,000
$3000
$500
$10,000
$500
$7500
Liabilities