Asset, Liability, Owner’s Equity, Revenue, and Expense Ac - PowerPoint Presentation

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Asset, Liability, Owner’s Equity, Revenue, and Expense Accounts

Chapter 1Slide3

Learning ObjectiveSlide4

Assets are ________ and other things of value owned and controlled by an ______________ or ______________ .________________________

____________________________________

AssetsSlide5

The owner’s right, claim, or financial interest is expressed by the word ___________ in the business.Another term that could be used is

___________

Owner’s EquitySlide6

Suppose the total value of the assets is $80,000 and the business entity does not owe any amount against the assets.

Owner’s Equity

What is the owner’s equity?Slide7

An entity’s assets consist of a truck that costs $35,000. The owner has invested $12,000, and the business entity has borrowed the remainder from the bank, which is a ________.

CreditorSlide8

We have now introduced a new classification, ___________, which represents debt. The creditors’ claims to the assets have priority over the claims of the owners.

LiabilitiesSlide9

An equation expressing the relationship of assets, liabilities, and owner’s equity is called the _________________ ____________ __________________.

Fundamental Accounting Equation

=

+Slide10

Millie Adair has $17,000 invested in her travel agency, and the agency owes creditors $5,000; that is, the agency has liabilities of $5,000.

Determine Assets

What is the amount of assets?Slide11

Larry Roland owns a car repair shop. His business has assets of $40,000, and it owes creditors $16,000.

Determine Owner’s Equity

What is the amount of owner’s equity?Slide12

Theo Viero’s insurance agency has assets of $86,000; his investment (his equity) amounts to $46,000.

Determine Liabilities

What is the amount of the agency’s liabilities?Slide13

Practice Exercise 1Slide14

Learning ObjectiveSlide15

The ________________ of the fundamental accounting equation _________ always equal the _______________________.

Recording Business TransactionsSlide16

J. Conner establishes her own business and calls it Conner’s Whitewater Adventure. Conner’s Whitewater Adventure is a sole proprietorship, a one-owner business.

Recording Business TransactionsSlide17

Transaction

(a) - Conner deposited $90,000 in a bank account in the name of the business.

Treating the business as independent from its owners, creditors, and customers is called the

_________________

concept.

Conner deposits $90,000 cash in a separate bank account in the name of Conner’s Whitewater Adventures.Slide18

Are the accounts increased or decreased?

Yes

Four Steps Used to Analyze Transactions

What accounts are involved?

What are the classification of the accounts involved?

Is the equation in balance after the transactions have been recorded?

_______ and J. Conner, ________

_______ is an _______ and J. Conner, _______ is an _______ _________ account

Cash is _______ because Conner’s Whitewater Adventures has _______ cash now than it had before

J. Conner, Capital is _______ because Conner has a _______ investment now than she had before.Slide19

Transaction

(a) -

Conner deposited

$90,000 in a bank account in the name of the business

.

The account denoted by the owner’s name followed by the word

____________

records the amount of the owner’s investment (or ________) in the business.Slide20

Transaction

(b) - Conner bought equipment, paying cash, $38,000.

It is important to note at this point that Conner does not invest any new money. She simply exchanges part of the business’s cash for equipment

.Slide21

Transaction

(c)

- Company bought equipment on account from Signal Products, $

4,320.

The

________________

account

shows an increase because the business owns $4,320 more in equipment.

The liability account

________________

is

used for short-term liability or charge accounts.

The company to which money is owed, Signal’s Products, is called a ________________ .Slide22

Transaction

(c) -

Company bought equipment on account from Signal Products, $4,320.Slide23

Transaction

(d)

- Company paid Signal Products, a creditor, $2,000 on account

.

The amount paid will be applied against the firm’s liability of $42,320.The asset

_________

and the liability

_________

are both

_________

by $2,000Slide24

Transaction

(e

) -

Owner invested equipment with a fair market value of $5,200 in the business

.

Conner invested her own computer equipment in the company. It has a

________________

of $5,200. The

_________________

is the present worth of an asset.Slide25

Summary of TransactionsSlide26

The following observations apply to all types of business transactions:_______ transaction is recorded as an _________ and/or _________ in _________ accounts_______ side of the equation is _________ to the _______ side of the equation

Note:Slide27

Practice Exercise 2Slide28

Practice Exercise 2 – Complete the formSlide29

Learning ObjectiveSlide30

___________ are the amounts ____________ by a business._________ earned for performing services_________ from selling merchandise

_________ income for the use of property_________ income for lending money

Revenue and Expense Accounts

Revenues may be in the form of

_____________

or

_________________________

.Slide31

___________ are the costs that relate to earning revenue (or the ____________________________ ).___________ expense for labor performed

___________ expense for the use of property___________

expense for the use of money

___________

expense for the use of various media

Revenue and Expense Accounts

When a business incurs or pays expenses,

______________ _____________

.

If a business earns revenue, an

______________

in

______________

occurs.Slide32

The Umbrella of ______________Slide33

The chart of accounts is the official list of accounts tailor-made for the business.Slide34

Practice Exercise 3Slide35

Learning ObjectiveSlide36

Transaction

(f)

- Company sold whitewater rafting tours for cash, $

8,000.

Conner receives

_____________

of $8,000 in return for whitewater rafting tours performed for customers over two weeks.Slide37

Transaction

(g)

- Company paid rent for the month, $1,250.

Shortly after opening the business, Conner pays the month’s rent of $1,250.Slide38

Transaction

(h)

- Company bought supplies on credit, $675.

Conner’s Whitewater Adventures buys office supplies costing $675 on credit from

Fineman

Company.Slide39

Transaction

(h)

- Company paid for insurance, $1,875.

The company paid for a one-year liability insurance policy. Because it is paid ____ ____________ for a period longer than one __________, it has value and is recorded as an __________ .Slide40

________ the ___________ to understand what is happening and how it affects the business.Decide on the ____________ of the __________ involved.

Decide whether the accounts are ____________ or ____________ .

After recording the transaction, make sure the __________ __________ is in ____________ .

Steps in Analyzing Transactions

RecapSlide41

Performing Step # 4:Slide42

Transaction

(i)

- Company receives a bill for an expense, $620.

The company receives a bill from the

Times

for newspaper advertising. _______ is not used because the bill has ____ ______ paid.Slide43

Transaction

(k)

-

Company sold services on account.

Conner’s Whitewater Adventures signs a contract with Crystal River Lodge to provide rafting adventures for guest. Whitewater Adventures provides 27 one-day rafting tours and bills Crystal River Lodge for $6,750.

The company uses the

____________________

account to record amounts due from charge customers.

____________________

is an

_________. Slide44

Transaction

(k)

- Company sold services on account.Slide45

Transaction

(l)

- Company paid

________ on

account.

Conner’s Whitewater Adventures pays $1,500 to Signal Products, its _______ as part payment on account.Slide46

Transaction

(m)

- Company paid an expense in cash, $225.

Conner’s Whitewater Adventures receives a bill from Solar Power, Inc. for $225. This bill has not been previously recorded.Slide47

Transaction

(n)

- Company paid creditor on account, $620.

Conner’s Whitewater Adventures pays $620 to the Times for advertising.

Recall that this bill had been previously recorded as a liability in transaction (j).Slide48

Transaction

(o)

- Company paid an expense in cash.

Conner’s Whitewater Adventures pays wages of a part-time employee, $2,360.Slide49

Transaction

(p) - Company buys equipment on account for $3,780, making a cash down payment of $1,850 and charging $1,930.

Conner’s Whitewater Adventures buys additional equipment from Signal Products for $3,780, paying $1,850 down with the remaining $1,930 on account.

Because buying an item on account is the

_________

buying on

_____________

, both terms are used to describe such transactions and involve

__________________

.Slide50

Transaction

(q)

- Company buys equipment on account for $3,780, making a cash down payment of $1,850 and charging $

1,930.

Note that three accounts are involved in this transaction –

______________Slide51

Transaction

(q) - Company receives cash on account from credit customer, $2,500

.

Conner’s Whitewater Adventures receives $2,500 from Crystal River Lodge to apply against the amount billed in transaction (k).Slide52

Transaction

(r) -

Company sells services for cash, $8,570.

Conner’s Whitewater Adventures receives revenue from cash customers during the rest of the month, $8,570.Slide53

Transaction

(s) -

Owner makes a cash withdrawal, $3,500.

Conner withdraws $3,500 from the business for personal living costs.

A

________________

may be considered the _________ of an ____________ in cash by the owner.Slide54

Practice Exercise 4

1–

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