BACC200- Financial AccountingSchool of BusinessDepartment of AccountingAccounting in ActionChapter 1|Part 1Objective:• Identify the activities and users associated with accounting.• State the accounting equation, and define its components.• Describe the four financial statements and how they are prepared.• Analyze the effects of business transactions on the accounting equation.Accounting consists of three basic activities Identifying Recording Communicatingthe economic events of an organization to interested users.LEARNINGOBJECTIVEIdentify the activities and users associated with accounting.1LO 1INTERNAL USERSWho Uses Accounting DataLO 1LO 1 Who Uses Accounting DataEXTERNAL USERSProprietorshipPartnershipCorporationForms of Business Ownership LO 2 Owned by one personOwned by two or more personsOwnership divided into shares of stockAssets Liabilities Owner's Equity=+LO 3 LEARNINGOBJECTIVEState the accounting equation, and define its components. 2Basic Accounting Equation The fundamental accounting equation, also called the balance sheet equation,  It represents the relationship between the assets, liabilities, and owner's equity of business.Assets Liabilities Owner's Equity=+ Current Assets Long Term Investment Property Plant & Equipment Intangible AssetsAssets are the resources that the business ownsBasic Accounting EquationAssets Liabilities Owner's Equity=+Basic Accounting Equation Current Liabilities Long Term LiabilitiesLiabilities are debts and obligations, parties to whom we owe moneyOwner's Equity are claims on total assets Assets Liabilities Owner's Equity=+Basic Accounting Equation Owner’s Capital (end of the accounting period)1. Current AssetsASSETSShort Term InvestmentCashAccounts Receivable A/RNotes Receivable N/RInventorySuppliesPrepaid Expenses2. Long term InvestmentsInvestments in bonds & stocksInvestments in Real Estates3. Property Plant Equipment (PPE)TrademarkBuildingsAutomativeEquipment4. Intangible AssetsGoodwillPatentCopyrightLand1. Current LiabilitiesLIABILITIESAccounts Payable A/PNotes Payable N/P less than 1 yearAccrued ExpensesUnearned Revenue2. Long Term LiabilitiesNotes Payable N/P more than 1 yearLong Term LoansMortgage PayableBonds PayableIncrease OE + Owner’s EquityRevenuesAdditional InvestmentDecrease OE -Owner’s DrawingsExpensesOwner’s EquityOwner’s Capital at The beginning of the periodAdditional InvestmentRevenuesDrawingsExpensesOwner’s Capital at The End of the periodBACC 210: Chapter 1 Balance Sheet Assets = Liabilities + Owner's Equity Debit Accounts Credit Accounts Liabilities Current Assets Current Liabilities Cash Notes Payable N/P (less than one year) Short Term Investment Account Payable A/P Accounts Receivable A/R Accrued Expenses ( salaries, utulities…) Notes Receivable N/R Unearned Revenue Inventory Supplies Long Term Liabilities Prepaid Expenses (Rent, Insurance,…) Notes Payable N/P (More than one year) Long term loans Long Term Investment Bonds Payable Public Investments in stocks Mortgage Payable Investments in Real Estate Property, Plant and Equipment (PPE) Owner's Equity Land Owner's Capital Buildings Vehicles (trucks, cars) Equipment Intangible Assets Goodwill Patent Copyright Trademark Total Assets = Total Liabilities + Owner's EquityCompanies prepare four financial statements :Balance SheetIncome StatementStatement of Cash FlowsOwner’s Equity StatementLEARNINGOBJECTIVEDescribe the four financial statements and how they are prepared.3LO 5 It Summarizes all the revenues earned and expenses incurred for a given period of timeIt Summarizes the changes in OE after adding Investment and Income and Deducting Drawings and lossesIt is a list of the Company’s assets liabilities and Owner’s equity at a specific dateIt summarizes the inflow and outflow of cash for a specific accounting periodNet income is needed to determine the ending balance in owner’s equity.Financial StatementsLO 5 SOFTBYTEIncome StatementFor the Month Ended September 30, 2017SOFTBYTEOwner’s Equity StatementFor the Month Ended September 30, 2017The ending balance in owner’s equity is needed in preparing the balance sheet.Illustration 1-9SOFTBYTEOwner’s Equity StatementFor the Month Ended September 30, 2017SOFTBYTEBalance SheetSeptember 30, 2017End Of Chapter One part