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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
What is accounting?What is accounting?
The planning, recording, analyzing, and interpreting of financial information.
Why is an accounting background important for a career in business? Business executives must understand the financial
position/well being of a company in order to make informed business decisions
1
LESSON 1-1
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Types of jobs in accountingTypes of jobs in accounting
General office worker Accounting clerks Bookkeepers CPA – certified public accountant
150 college credits 2 years experience and a test
Given twice a year; four parts – 1. business law, 2. audit, 3. tax, non-profit, and cost accounting, 4. financial accounting
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LESSON 1-1
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Governing bodiesGoverning bodies
AICPA – American Institute of Certified Public Accountants (professional association)
PICPA – Pennsylvania Institute of Certified Public Accountants
GAAP – Generally Accepted Accounting Principles Set the rules, principle, and guidelines accountants follow
FASB – Financial Accounting Standards Board Create the broad accounting concepts and standards for
financial reporting
SEC – Securities and Exchange Commission
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LESSON 1-1
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Demand for accountantsDemand for accountants
What do you think the demand is? Why? US Patriot Act, 2001
Because of terrorist attacks, 9/11 – greater study of cash flow
Sarbanes -Oxley Act, 2002 More audit requirements because of Enron
Forensic Accounting
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LESSON 1-1
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Skills/qualities of an accountantSkills/qualities of an accountant
Skills Communication skills Detail oriented Computer skills Math skills Organizational skills Critical thinking skills Good ethics/morals
Qualities Dependable Positive attitude Desire to help Friendly
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LESSON 1-1
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1LESSON 1-1
The Accounting Equation
Focus question: How do transactions in a business affect the accounting equation?
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-1
THE ACCOUNTING EQUATIONTHE ACCOUNTING EQUATION
Assets = Liabilities + Owner’s Equity
Anything Owned
Any Amount Owed
Owners Investment in the Company
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Anything of value that is owned by the entity.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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ASSETS are the RESOURCES OWNED BY A BUSINESS .
Here are some types of assets that might be owned by a business company:
LandLand
EquipmentEquipment
BuildingsBuildings
CashCash
VehiclesVehicles
Store Supplies
Store Supplies
Notes Receivable
Notes Receivable
Accounts ReceivableAccounts
Receivable
ASSETSASSETS
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Land Computer Vehicle Cash
ExamplesExamples
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LiabilitiesLiabilities
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
An amount the business owes.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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• Creditors are the people or companies to whom a business owes something (like money).
• Here are some types of liabilities that a company might owe:
Taxes Payable
Wages Payable
Notes Payable
Accounts Payable
LIABILITIES
LIABILITIES are the CREDITOR’S CLAIMS ON ASSETS.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
The most common liability is a loan. Another common liability is called creditors.
A creditor, also known as a payable, is any business or person (apart from the bank) that you owe.
Suppliers (who you owe for products purchased on credit) would fall under creditors.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
The amount remaining after deducting all liabilities from the assets.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
In other words…In other words…
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Represents the value of the assets that the owner can lay claim to.
The value of all the assets after deducting the value of assets needed to pay liabilities.
It is the value of the assets that the owner really owns.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
THE ACCOUNTING EQUATIONTHE ACCOUNTING EQUATION
MUST ALWAYS BE IN BALANCE!!!
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LESSON 1-1
page 8
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-1
TERMS REVIEWTERMS REVIEW
accounting accounting system accounting records financial statements service business proprietorship asset
equities liability owner’s equity accounting equation ethics business ethics
page 9
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-2LESSON 1-2
How Business Activities Change the Accounting Equation
Focus question: How do transactions affect accounts in the accounting equation?
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-2
RECEIVING CASHRECEIVING CASH
Transaction 1 August 1. Received cash from owner as an investment, $5,000.00.
page 10
1. Read the transaction.2. Identify the accounts affected.3. Classify the accounts affected.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-2
PAYING CASHPAYING CASH
Transaction 2 August 3. Paid cash for supplies, $275.00.
page 11
• A transaction does not always require than an amount be recorded on both sides of the equation…equation remains in balance.
• One asset is being exchanged for another.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-2
Transaction 3 August 4. Paid cash for insurance, $1,200.00
• Insurance policy – something of value own by TechKnow
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-2
TRANSACTIONS ON ACCOUNTTRANSACTIONS ON ACCOUNT
Transaction 4 August 7. Bought supplies on account from Supply Depot, $500.00.
page 12
It is common business practice to buy items and pay for them at a later date (bought on account).
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-2
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-2
TERMS REVIEWTERMS REVIEW
transaction account account title account balance capital
page 13
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-3LESSON 1-3
How Transactions Change Owner’s Equity in an Accounting Equation
Focus question: How do transactions affect accounts in the accounting equation?
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-3
REVENUE TRANSACTIONSREVENUE TRANSACTIONS
Transaction 6 August 12. Received cash from sales, $295.00.
page 14
• What accounts are affected? Are they increased or decreased?• Revenue – increase in OE resulting from the operation of a business.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
REVENUE TRANSACTIONSREVENUE TRANSACTIONS
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LESSON 1-3
• What accounts are affected? Are they increased or decreased?• Sale on account – sale for which cash will be received at a later date.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-3
EXPENSE TRANSACTIONSEXPENSE TRANSACTIONS
Transaction 8 August 12. Paid cash for rent, $300.00.
page 15
• What accounts are affected? Are they increased or decreased?• Expense – decrease in OE resulting from the operation of a business.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-3
• What accounts are affected? Are they increased or decreased?
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-3
OTHER CASH TRANSACTIONSOTHER CASH TRANSACTIONS
Transaction 10 August 18. Received cash on account from Oakdale School, $200.00.
page 16
• OE is not affected when cash is received on account. Why?
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-3
• What is the difference between an expense and a withdrawal?• Both decrease OE, but a withdrawal is not an expense because it is not a result of
normal business operations.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-3
Two things that Increase the Owners Equity account:1. Investments 2. Revenue
Two things that Decrease the Owners Equity account:1. Expenses 2. Withdrawals
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 1-3
TERMS REVIEWTERMS REVIEW
revenue sale on account expense withdrawals
page 17
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