Chapter 2 - The system of accounting. This chapter presents the following content: the entity concept, assets, equities, revenues, expenses, the accounting equation, the account, summary of the debit/credit rules, records in the accounting system, journal entries,. | The System of Accounting The Entity Concept Any organizational unit The Entity Concept Any organizational unit for which we want The Entity Concept Any organizational unit for which we want financial information Assets Anything of value held by an organization Assets have Assets Anything of value held by an organization Assets have Potential usefulness Assets Anything of value held by an organization Assets have Potential usefulness Future usefulness Assets Anything of value held by an organization Assets have Potential usefulness Future usefulness Economic Value Equities Claims against the total assets of an organization Liabilities Claims of nonowners Owners Equity Claims of owners Revenues Inflows of assets that result from performing services or selling goods Revenues are realized when the service is performed or Revenues Inflows of assets that result from performing services or selling goods Revenues are realized when the service is performed or the goods are delivered Expenses | The System of Accounting The Entity Concept Any organizational unit The Entity Concept Any organizational unit for which we want The Entity Concept Any organizational unit for which we want financial information Assets Anything of value held by an organization Assets have Assets Anything of value held by an organization Assets have Potential usefulness Assets Anything of value held by an organization Assets have Potential usefulness Future usefulness Assets Anything of value held by an organization Assets have Potential usefulness Future usefulness Economic Value Equities Claims against the total assets of an organization Liabilities Claims of nonowners Owners Equity Claims of owners Revenues Inflows of assets that result from performing services or selling goods Revenues are realized when the service is performed or Revenues Inflows of assets that result from performing services or selling goods Revenues are realized when the service is performed or the goods are delivered Expenses Outflows of assets or incurrence of liabilities while earning revenues A business incurrs expenses to earn revenues The Accounting Equation Things of Value = Claims Assets = Equities Assets = Liabilities + Owners Equity The Account Account Title The Account Left side Account Title The Account Left side Right side Account Title The Account Left side Right side the debit side Account Title The Account Left side Right side the debit side the credit side Account Title Summary of the Debit/Credit Rules Assets Summary of the Debit/Credit Rules Assets Appear on the left (debit) side of the equation Summary of the Debit/Credit Rules Assets Appear on the left (debit) side of the equation Therefore we: Increase them with debits Decrease them with credits Summary of Debit/Credit Rules Liabilities Summary of Debit/Credit Rules Liabilities Appear on the right (credit) side of the equation Summary of Debit/Credit Rules Liabilities Appear on the right (credit) side of the equation Therefore we: .
