Chapter 1 - Principles of accounting. After completing this unit, you should be able to: Describe the functions of accounting, complete an accounting equation, prepare a balance sheet, demonstrate the process of recording business transactions in equation form. | CHAPTER ONE Principles of Accounting 1. Describe the functions of accounting. 2. Complete an accounting equation. 3. Prepare a balance sheet. 4. Demonstrate the process of recording business transactions in equation form. PRINCIPLES OF ACCOUNTING Objectives: 1- Beginning an Accounting System The proprietor should make a list of the money and other property that is being used to begin the business. All property the business owns are its assets. 1- Beginning an Accounting System (continued) Debts owed by a business are liabilities. Owner’s equity is an accounting term that indicates the financial interest of the owner in a business. 1- The Accounting Equation Assets = Liabilities + Owner’s Equity 1- The Balance Sheet The balance sheet is an itemized list of the assets, liabilities, and owner’s equity of a business on one particular date. 1- The Effect of Business Activities on the Balance Sheet Business activities such as buying, selling, receiving money, and . | CHAPTER ONE Principles of Accounting 1. Describe the functions of accounting. 2. Complete an accounting equation. 3. Prepare a balance sheet. 4. Demonstrate the process of recording business transactions in equation form. PRINCIPLES OF ACCOUNTING Objectives: 1- Beginning an Accounting System The proprietor should make a list of the money and other property that is being used to begin the business. All property the business owns are its assets. 1- Beginning an Accounting System (continued) Debts owed by a business are liabilities. Owner’s equity is an accounting term that indicates the financial interest of the owner in a business. 1- The Accounting Equation Assets = Liabilities + Owner’s Equity 1- The Balance Sheet The balance sheet is an itemized list of the assets, liabilities, and owner’s equity of a business on one particular date. 1- The Effect of Business Activities on the Balance Sheet Business activities such as buying, selling, receiving money, and paying bills cause continual changes in the amounts of the assets, liabilities, and owner’s equity. 1- The Effect of Business Activities on the Balance Sheet (continued) These business activities are called transactions and need to be recorded as part of the business’ operations. 1- Accounting Terminology Account Accounting Accounting Equation Accounts Payable Assets Balance Sheet Business Transactions Creditors Invest Investment Liabilities Owner’s Equity Proprietor 1- Chapter Summary Assets are the property owned by a business. Liabilities are debts owed by a business. Owner’s equity is the difference between the assets and the liabilities and represents the financial interest of the owner in a business. 1- Chapter Summary(continued) Liabilities represent the claims of creditors to the assets of a business, and owner’s equity is the claim of the owner to the assets. The fundamental accounting equation is: Assets=Liabilities + Owner’s Equity. 1- Chapter .
