1 - 1 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater

Accounting Concepts
and Procedures:
An Introduction
Chapter 1
1 - 2 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objective 1
Defining and listing the
functions of accounting.
1 - 3 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Accounting
Managers
Owners
Investors
Government
1 - 4 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Sole Proprietorship
Partnership
Corporation
Categories of Business
Organizations
1 - 5 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Types of Business
Organizations
Ownership Business owned by one person.
Formation Easy to form.
Owner could lose personal
assets to meet obligations
of business.
Liability
Closing
Ends with death of owner
or closing of business.
1 - 6 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Types of Business
Organizations
Business owned by
more than one person.
Ownership
Easy to form. Formation
Ends with death of partner
or exit of a partner.
Closing
Partners could lose personal
assets to meet obligations
of partnership.
Liability
1 - 7 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Types of Business
Organizations
Business owned by stockholders. Ownership
More difficult to form. Formation
Can continue indefinitely. Closing
Limited personal risk.
Stockholders’ loss is limited to
their investment in the company.
Liability
1 - 8 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Classifying
Business Organizations
Service businesses provide services.
Merchandise businesses sell products.
Manufacturing businesses make products.
1 - 9 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Definition of Accounting
Accounting is the process that...
analyzes,
records,
classifies,
summarizes,
reports, and...
interprets financial information.
1 - 10 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objective 2
Recording transactions in the
basic accounting equation.
1 - 11 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-1
(The Accounting Equation)
Assets are the
items owned by
the business.
Equities are
the claims
against the
assets.
1 - 12 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-1
(The Accounting Equation)
Liabilities are
the creditor’s
equity.
Owner’s equity
is the rights
of ownership.
1 - 13 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-1
(The Accounting Equation)
Assets

Liabilities
=
Owner’s
Equity
1 - 14 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-1
(The Accounting Equation)
A. August 28: Cathy Hall invested
$7,000 in cash and $800 of office
equipment into the business.
B. August 29: Law practice buys
office equipment for cash $900.
C. August 30: Buys additional
office equipment on account $400.
1 - 15 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-1
(The Accounting Equation)
$8,200 = $8,200
a) Cash + $7,000 + $7,800
a) Equipment + 800
b) Cash – 900
Equipment + 900
Equipment + 400 + 400
Assets = Liabilities +
Owner’s
Equity
1 - 16 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-1
(Shift in Assets)
The makeup of the assets has
changed, but the total of the
assets remains the same.
1 - 17 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-2
(The Balance Sheet)
The balance sheet shows the company’s
financial position as of a particular date.
Company name
Name of the statement
Date
1 - 18 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-2
(The Balance Sheet)
Cathy Hall, Attorney-at-Law
Balance Sheet
August 31, 200x
Assets
Cash $6,100
Equipment 2,100

Total $8,200
Liabilities and Owner’s Equity
Accounts Payable $ 400
Owner’s Equity
Cathy Hall, Capital 7,800
Total $8,200
1 - 19 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Seeing how revenue, expenses,
and withdrawals expand the
basic accounting equation.
Learning Objective 3
1 - 20 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-3 (The Accounting
Equation Expanded)
An expanded accounting equation
includes the following:
Revenues (cash, accounts receivable)
Expenses
Withdrawals
1 - 21 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-3 (The Accounting
Equation Expanded)
Revenues
Net income or
Net loss
– =
Expenses
1 - 22 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-3 (The Accounting
Equation Expanded)
Beginning
capital
PLUS
Additional
investment
Net income Withdrawals + –
1 - 23 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-3 (The Accounting
Equation Expanded)
D. September 1-30: Cathy Hall provided
legal services for cash, $3,000.
E. September 1-30: Provided legal
services on account, $4,000.
F. September 1-30: Received $700
cash as partial payment from previous
services performed on account.
G. September 1-30 paid salaries expense, $600.
1 - 24 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-3 (The Accounting
Equation Expanded)
H. September 1-30: Paid rent expense, $700.
I. September 1-30: Incurred advertising
expenses of $300, to be paid next month.
J. September 1-30: Cathy
withdrew $200 for personal use.
1 - 25 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Objective 4
Preparing an income
statement, a statement
of owner’s equity,
and a balance sheet.
1 - 26 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-4 (Preparing
Financial Statements)
Cathy Hall, Attorney-at-Law
Income Statement
For Month Ended September 30, 200x
Revenue:
Legal fees $7,000
Operating expenses:
Salaries expense $600
Rent expense 700
Advertising expense 300 1,600

Net income $5,400
1 - 27 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-4 (Preparing
Financial Statements)
Cathy Hall, Attorney-at-Law
Statement of Owner’s Equity
For Month Ended September 30, 200x
Cathy Hall, Capital, Sept. 1, 200x $ 7,800
Net Income for Sept. $5,400
Less Withdrawals for Sept. 200
Increase in Capital 5,200
Cathy Hall, Capital, Sept. 30, 200x $13,000
1 - 28 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Learning Unit 1-4 (Preparing
Financial Statements)
Cathy Hall, Attorney-at-Law
Balance Sheet
September 30, 200x
Assets
Cash $ 8,300
Accts. Rec. 3,300
Equipment 2,100
Total $13,700
Liabilities and Owner’s Equity
Accounts Payable $ 700
Owner’s Equity
Cathy Hall, Capital 13,000
Total $13,700
1 - 29 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
Generally Accepted
Accounting Principles (GAAP)
These are the procedures and guidelines
that must be followed during
the accounting process.
1 - 30 © 2004 Prentice Hall Business Publishing, College Accounting: A Practical Approach, 9e by Slater
End of Chapter 1