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Introduction to
Accounting and Business

Student Version

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Describe the nature of a

business, the role of
accounting, and ethics in
business.

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Types of Businesses
(jenis Usaha)
Service Business Service
Delta Air Lines Transportation services

Merchandising Business Product

Wal-Mart General merchandise

Manufacturing Business Product

General Motors Corp. Cars, trucks, vans
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The Role of Accounting in Business

Accounting can be defined as an

information system that provides
reports to users about the economic
activities and condition of a business.

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Managerial Accounting
The area of accounting that provides
internal users with information is called
managerial accounting.
The objective of managerial
accounting is to provide relevant and
timely information for managers’ and
employees’ decision-making needs.

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Financial Accounting
The area of accounting that provides
external users with information is
called financial accounting.
The objective of financial accounting
is to provide relevant and timely
information for the decision-making
needs of users outside of the
business.
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Summarize the
development of accounting
principles and relate them
to practice.

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Business Entity Concept

Under the business entity
concept, the activities of a
business are recorded
separately from the activities
of its owners, creditors, or
other businesses.

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Forms of Business Entity
(bentuk Usaha)
• A proprietorship is owned by one individual.
• A partnership is similar to proprietorship
except that it is owned by two or more
individuals.
• A corporation is organized under state or
federal statutes as a separate legal taxable
entity.
• A limited liability company (LLC) combines
attributes of a partnership and a corporation.
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Cost Concept
Under the cost concept,
amounts are initially recorded
in the accounting records at
their cost or purchase price.

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Objectivity Concept
The objectivity concept requires
that the amounts recorded in the
accounting records be based on
objective evidence.

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Unit of Measure Concept

The unit of measure concept
requires that economic data
be recorded in dollars.

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State the accounting

equation and define each
element of the equation.

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The Accounting Equation

Assets = Liabilities + Owner’s Equity

The resources The rights of the The rights of the

owned by a creditors are the owners
business debts of the
business

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Describe and illustrate how

business transactions can be
recorded in terms of the resulting
change in the elements of the
accounting equation.

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Business Transaction
A business transaction is an
economic event or condition that
directly changes an entity’s
financial condition or its results
of operations.

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Transaction A

On November 1, 2009, Chris Clark

deposits $25,000 in a bank account
in the name of NetSolutions.

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Transaction A (continued)

Assets = Owner’s Equity

CASH CHRIS CLARK, CAPITAL
a. 25,000 = 25,000
Investment by Chris Clark

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Transaction B
On November 5, 2009, NetSolutions
paid $20,000 for the purchase of land
as a future building site.

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Transaction B (continued)

Assets = Owner’s Equity

CASH + LAND CHRIS CLARK, CAPITAL
Bal. 25,000 = 25,000
b. –20,000 +20,000
Bal. 5,000 20,000 25,000

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Transaction C
On November 10, 2009,
NetSolutions purchased supplies
for $1,350 and agreed to pay the
supplier in the near future.

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Transaction C (continued)

Assets = Liabilities + Owner’s Equity

ACCOUNTS CHRIS CLARK,
CASH + SUPPLIES + LAND PAYABLE + CAPITAL
=
Bal. 5,000 20,000 25,000
c. +1,350 +1,350
Bal. 5,000 1,350 20,000 1,350 25,000

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Transaction D
On November 18, 2009, NetSolutions
received cash of $7,500 for providing
services to customers. A business
earns money by selling goods or
services to its customers. This amount
is called Revenue.

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Transaction D (continued)

Assets
CASH + SUPPLIES + LAND
Bal. 5,000 1,350 20,000
d. +7,500
Bal. 12,500 1.350 20,000

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Transaction D (continued)

Liabilities + Owner’s Equity

ACCOUNTS CHRIS CLARK, FEES
PAYABLE + CAPITAL + EARNED
Bal. 1,350 25,000
d. +7,500
Bal. 1,350 25,000 7,500

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Transaction E
On November 30, 2009, NetSolutions
paid the following expenses during
the month: wages, $2,125; rent, $800;
utilities, $450; and miscellaneous,
$275.

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Transaction E (continued)

Assets
CASH + SUPPLIES + LAND
Bal. 12,500 1,350 20,000
e. –3,650
Bal. 8,850 1.350 20,000

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Transaction E (continued)

Liabilities + Owner’s Equity

ACCOUNTS CHRIS CLARK, FEES WAGES RENT UTIL. MISC.
PAYABLE + CAPITAL + EARNED – EXP. – EXP. – EXP. – EXP.
Bal. 1,350 25,000 7,500
e. –2,125 –800 –450 –275
Bal. 1,350 25,000 7,500 –2,125 –800 –450 –275

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Transaction F
On November 30, 2009,
NetSolutions paid creditors on
account, $950.

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Transaction F (continued)

Assets
CASH + SUPPLIES + LAND
Bal. 8,850 1,350 20,000
f. –950
Bal. 7,900 1.350 20,000

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Transaction F (continued)

Liabilities + Owner’s Equity

ACCOUNTS CHRIS CLARK, FEES WAGES RENT UTIL. MISC.
PAYABLE + CAPITAL + EARNED – EXP. – EXP. – EXP. – EXP.
Bal. 1,350 25,000 7,500 –2,125 –800 –450 –275
f. –950
Bal. 400 25,000 7,500 –2,125 –800 –450 –275

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Transaction G
On November 30, 2009, Chris Clark
determined that the cost of supplies
on hand at the end of the period was
$550.

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Transaction G (continued)

Assets
CASH + SUPPLIES + LAND
Bal. 7,900 1,350 20,000
g. –800
Bal. 7,900 550 20,000

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Transaction G (continued)

Liabilities + Owner’s Equity

ACCOUNTS CHRIS CLARK, FEES WAGES RENT SUP. UTIL. MISC.
PAYABLE + CAPITAL + EARNED – EXP. – EXP. – EXP. – EXP. – EXP.
Bal. 400 25,000 7,500 –2,125 –800 –450 –275
g. –800
Bal. 400 25,000 7,500 –2,125 –800 –800 –450 –275

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Transaction H

On November 30, 2009, Chris Clark

withdrew $2,000 from NetSolutions
for personal use.

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Transaction H (continued)

Assets
CASH + SUPPLIES + LAND
Bal. 7,900 550 20,000
h. –2,000
Bal. 5,900 550 20,000

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Transaction H (continued)

Liabilities + Owner’s Equity

ACCTS. CLARK, CLARK, FEES WAGES RENT SUP. UTIL. MISC.
PAY. + CAPITAL – DRAW. + EARNED – EXP. – EXP. – EXP. – EXP. – EXP.
Bal. 400 25,000 7,500 –2,125 –800 –800 –450 –275
h. –2,000
Bal.400 25,000 –2,000 7,500 –2,125 –800 –800 –450 –275

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Describe the financial

statements of a
proprietorship and
explain how they
interrelate.

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Income Statement

The income statement reports

the revenues and expenses for
a period of time, based on the
matching concept.

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Matching Concept
The matching concept is
applied by matching the
expenses with the revenue
generated during a period
by those expenses.

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The excess of revenue over the

expenses is called net income
or net profit. If the expenses
exceed the revenue, the excess
is a net loss.

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Exhibit 6 Financial Statements for NetSolutions

Net income is carried

to the statement of
owner’s equity.
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Exhibit 6 Financial Statements for NetSolutions (continued)

From the income statement

To the balance sheet

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Exhibit 6 Financial Statements for NetSolutions (continued)

This amount is compared From the statement

to the net cash flow on the of owner’s equity
statement of cash flows.

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Exhibit 6 Financial Statements for NetSolutions (continued)

This amount should match

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