Starting a Proprietorship Chapter 1 Accounting Planning recording

Starting a Proprietorship Chapter #1

• Accounting – Planning, recording, analyzing, and interpreting financial information. • Service Business – A business that performs an activity for money ($). • Proprietorship – A business owned by one person.

Classifications • Asset – Anything of value that is owned. (Accounts Receivable) • Liability – An amount of $ owed by a business. (Accounts Payable) • Owner’s Equity – Money ($) left over after liabilities are subtracted from assets.

Accounting Equation A = L + OE Assets Liabil. Ities Owner‘s Equity

Section 2 – Business Activities • Business activities that change the $ value of your company’s assets, liabilities, and/or owner’s equity are transactions. • A record summarizing all information pertaining to a single item in the accounting equation. . . Account – It’s name is the account title – $ left in the account is its account balance – Account name which summarizes the owner’s equity account(s) is called capital

Sample transaction August 1. Received cash from owner as an investment, 10, 000. 00

Decide which accounts are affected here and how are they affected. . . • August 3. Paid cash for supplies, $1, 577. • August 4. Paid cash for insurance, $1, 200. • August 7. Bought supplies on account from Ling Music Supplies, $2, 720. • August 8. Paid cash on account to Ling Music Supplies, $1, 360.

Section #3 -- Balance Sheets • A balance sheet is a financial statement that reports assets, liabilities, and owner’s equity on a specific date.