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    CH 09

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    Barry Patnett

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    © All Rights Reserved
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    CH 09

    Uploaded by

    Barry Patnett
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    Ch09.ppt

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    Copyright:

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    124 views15 pages

    CH 09

    Uploaded by

    Barry Patnett

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    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 15

    CHAPTER NINE

    Principles
    of
    Accounting
    9-3

    PRINCIPLES OF ACCOUNTING

    Objectives:
    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.

    McGraw-Hill/Irwin
    Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
    9-4

    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.

    McGraw-Hill/Irwin
    Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
    9-5

    The Accounting Equation

    Assets = Liabilities + Owner’s Equity

    McGraw-Hill/Irwin
    Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
    9-6

    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.

    McGraw-Hill/Irwin
    Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
    9-7

    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.

    McGraw-Hill/Irwin
    Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
    9-8

    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.

    McGraw-Hill/Irwin
    Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
    9-9

    Accounting Terminology

    •Account •Creditors
    •Accounting •Invest
    •Accounting Equation •Investment
    •Accounts Payable •Liabilities
    •Assets •Owner’s Equity
    •Balance Sheet •Proprietor
    •Business Transactions

    McGraw-Hill/Irwin
    Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
    9-10

    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.
    McGraw-Hill/Irwin
    Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
    9-11

    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.
    McGraw-Hill/Irwin
    Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
    9-12

    Chapter Summary(continued)
    • The balance sheet is a statement of
    assets, liabilities, and owner’s
    equity. It shows the financial
    position of a business on one
    particular date.
    • Every business transaction affects
    at least two items.

    McGraw-Hill/Irwin
    Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
    9-13

    Topic Quiz
    Answer the following true/false questions:
    1. All the properties a business owns are
    called assets. TRUE

    2. Debts owed by a business are called


    TRUE
    liabilities.

    3. Owner’s equity is the financial FALSE


    interest of creditors in a business.

    McGraw-Hill/Irwin
    Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
    9-14

    Investigating on the Internet


    Sources of information about balance
    sheets can be accessed at the websites of
    most major businesses.
    As a research assignment, access two or
    three business’ websites. Compare and
    contrast their use of balance sheets and
    how they are used to show the state of the
    business.
    McGraw-Hill/Irwin
    Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
    9-15

    Topic Quiz (continued)


    3. Owner’s equity is the financial interest of
    creditors in a business.

    FALSE
    It is the financial interest of the owner
    in a business.
    (Return to Topic Quiz)
    McGraw-Hill/Irwin
    Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

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