This course covers the complete accounting cycle and is designed for those who are interested in working in the areas of bookkeeping, clerical accounting, finance or general office work or are looking to review their accounting knowledge.Our accounting course teaches principles of accounting, which are consistent across the globe. Even though there may be minor differences in accounting principles in different countries, the core accounting principles are the same.
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1. Welcome, dear students !
2. Lesson 2Accounting Equation 3. Lesson 2. Learning
objectives1Property and Financial Claims2Assets , Liabilities and
Owners Equity3Accounting Equation 4. Lesson 2: What Youll LearnWHY
IT IS IMPORTANTUNDERSTAND EQUATIONDescribe the relationship List
and define each part ofbetween property and the accounting
equation.financial claims.Explain the meaning of the Assets
Liabilities Owners Equityterm equities as it is used inaccounting.
5. Lesson 2: Accounting EquationKey Termspropertyassetsfinancial
claim equitycreditowners equitycreditorliabilities 6. 1. Property
What is Property ?.In accounting,Property is anything ofproperty
andvalue that a person orfinancial claims arebusiness owns
andmeasured in dollartherefore controls.amounts.A financialclaim is
a legalWhen you own anright to an itemitem of property, youhave a
legal right tothat item. 7. Buying on credit from CreditorThe
business or personselling you the item on credit is When you buy
property on credit,called a creditor . you do not have the only
financialclaim to the property.A creditor can be any personor
business to which youYou share the financial claim to thatowe
money.property withyour creditor.. 8. 2. AssetsProperty or items of
value owned by a businessare referred to as assetsBusinesses can
have various types of assets, such as: cash office equipment
manufacturing equipment buildings land 9. Definition of an asset:
Assets are things that the company owns. * Assets also include
costs paid in advance that have not yet expired, such as prepaid
advertising, prepaid insurance, prepaid legal fees, and prepaid
rent. 10. Types of Equities"Owners Equity" are the words used on
the balancesheet when the company is a sole proprietorship.An
example of an owners equity account is Mary Smith,Capital (where
Mary Smith is the owner of the soleproprietorship).If the company
is a corporation, the words StockholdersEquity are used instead of
Owners Equity. 11. Definition of an Liabilities:Liabilities are
obligations of the company.They are amounts owed to creditors for
apast transaction and they usually have theword "payable" in their
account title.Along with owners equity, liabilities can bethought
of as a source of the companysassets.They can also be thought of as
a claimagainst a companys assets. 12. Another example of
LiabilitiesLiabilities also include amounts received in advance
forfuture services.Since the amount received (recorded as the asset
Cash)has not yet been earned, the company defers thereporting of
revenues and instead reports a liability such asUnearned Revenues
or Customer Deposits. 13. What Are the Two Types of Equities?The
accounting term for the financial claims to these assets is
equities. Owners Equity Liabilities Definition of OwnersDefinition
of Liabilities: Equity:Liabilities are the debts Owners Equity
along of a business. They are with liabilities can bemeasured by
the thought of as aamount of money source of theowed by a business
to companys assets.its creditors. 14. 3. The accounting equation
for a sole proprietorshipASSETS = LIABILITIES +OWNERS EQUITYThe
accounting equation for a corporation is:Assets = Liabilities +
Stockholders Equity 15. SummaryThe resources owned by a business
are its assets.Examples of assets include cash, land, buildings,
andequipment. 16. Summary: LiabilitiesThe rights of creditors are
the debts of the business and arecalled liabilities. 17. Summary:
PropertyFinancial information about propertyThe purpose of
accounting is toprovide:Financial claim to property property
financial claim Anything of value thatA legal right to property.a
person or business owns 18. Summary : PropertyA creditor lends you
money. The financial claim isshared.You buy something on
credit.credit creditorWhen you buy something Any person or business
to and agree to pay for itwhich you owe money. later. 19. Summary:
Accounting EquationThe following equation shows the relationship
among assets,liabilities, and owners equity:Assets = Liabilities +
Owners Equity 20. Follow next lessonLesson 3:Business
transactionsEnroll NOWfor full version with lecturer
