C1 - 1
Learning Objectives
1,Definitions of Six Basic Accounting Terms
2,Double Entry System
3,Balance Sheet
4,Trial Balance
5,Trading and Profit and Loss Account
6,Journal Entries
Power Notes
Approaching the Subject of Accounting(1)
Chapter 1
C1
C1 - 2
Note,To select a topic,type the slide # and press Enter.
Accounting – An Information Process
Users of Accounting Information
Profession of Accounting
The Accounting Equation
Business Transactions
Financial Statements
Ratio of Liabilities to Stockholders Equity
Slide # Power Note Topics
Power Notes
Approaching the Subject of Accounting(1)
Chapter F1
3
9
11
16
19
53
69
C1 - 3
1.Assets
2.Liabilities
3.Balance Sheet
4.Debtors
5.Creditors
6.Proprietorship
Definitions of Basic Terms
C1
C1 - 4
Double-Entry System
,Double-entry system is based on a simple
concept,each party in a business transaction
will receive something and give something in
return,In bookkeeping terms,what is
received is a debit and what is given is a
credit,The T account is a representation of a
scale or balance.”
Luca Pacioli
Developer of
Double-Entry
System
Scale or Balance
Receive
DEBIT
Give
CREDIT
T account
Left Side
Receive
DEBIT
Right Side
Give
CREDIT
C1 - 5
Resources
The Accounting Equation
What are an organization’s resources called?
C1 - 6
Assets
Resources = Sources
The Accounting Equation
What are the
sources of the
assets?
Cost of
resources used
in the business
C1 - 7
Assets
Liabilities
Stockholders’
Equity
Resources = Sources
Cost of
resources used
in the business
Resources
supplied by
creditors and
owners
The Accounting Equation
C1 - 8
Expanded Accounting Equation
,The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
DEBITS
received
CREDITS
given=
C1 - 9
Expanded Accounting Equation
,The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
DEBITS
received
CREDITS
given=
Assets
C1 - 10
Expanded Accounting Equation
,The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
Assets
DEBITS
received
CREDITS
given=
Expenses
C1 - 11
Expanded Accounting Equation
,The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
Expenses
Assets
DEBITS
received
CREDITS
given=
Liabilities
C1 - 12
Expanded Accounting Equation
,The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
Expenses
Liabilities
Assets
DEBITS
received
CREDITS
given=
Owner’s Equity
C1 - 13
Expanded Accounting Equation
,The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
Expenses
Liabilities
Owner’s Equity
Assets
DEBITS
received
CREDITS
given=
Revenues
C1 - 14
Expanded Accounting Equation
,The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
Expenses
Liabilities
Owner’s Equity
Assets
DEBITS
received
CREDITS
given=
Revenues
Net
Income
C1 - 15
Balance Sheet as at (date)
Assets
$
Total $
Liabilities
$
Total $
Balance Sheet
C1 - 16
Balance Sheet of Business A as at Now
Assets
Cash $3,000
Total $ 3,000
Liabilities
$
Total $
Balance Sheet
C1 - 17
Balance Sheet of Business A as at Now
Assets
Cash $30,000
Total $ 30,000
Liabilities
Owing to Mr,Wong $30,000
Total $30,000
Balance Sheet
C1 - 18
Balance Sheet of Business A as at end of Day 1
Assets
Cash $15,000
Equipment 10,000
Stock 5,000
Total $ 30,000
Liabilities
Capital $30,000
Total $30,000
Balance Sheet
C1 - 19
Balance Sheet of Business A as at end of Day 2
Assets
Cash $15,000
Equipment 10,000
Stock 3,400
Debtor – Mr,Chan 600
Total $ 30,000
Liabilities
Capital $30,000
Total $30,000
Balance Sheet
C1 - 20
Balance Sheet of Business A as at end of Day 3
Assets
Cash $5,800
Bank balance 10,000
Equipment 10,000
Stock 4,000
Debtor – Mr,Chan 600
Total $ 30,400
Liabilities
Capital $30,000
Creditor (Mr,Lin) 400
Total $30,400
Balance Sheet
C1 - 21
Balance Sheet of Business A as at end of Day 4
Assets
Cash $5,500
Bank balance 10,200
Equipment 10,000
Stock 4,000
Debtor – Mr,Chan 400
Total $ 30,100
Liabilities
Capital $30,000
Creditor (Mr,Lin) 100
Total $30,100
Balance Sheet
C1 - 22
Assets
Cash $5,500
Bank balance 10,200
Equipment 10,000
Stock 4,000
Debtor – Mr,Chan 400
Total $ 30,100
Liabilities
Capital $30,000
Creditor (Mr,Lin) 100
Total $30,100
Balance Sheet of Business A as at end of Day 4
Balance Sheet
C1 - 23
Assets
Cash $5,500
Bank balance 10,200
Equipment 10,000
Stock 4,000
Debtor – Mr,Chan 400
Total $ 30,100
Liabilities
Capital $30,000
Creditor (Mr,Lin) 100
Total $30,100
Balance Sheet of Business A as at end of Day 4
Balance Sheet
C1 - 24
Trial Balance
Definition and its function
Trial Balance
C1 - 25
Trial Balance
Trial Balance as at (date)
Capital 57,000
Premises 48,000
Equipment 8,000
Cash 3,000
Bank(overdraft) 2,000
Trade Creditors 5,000
Trade Debtors 7,000
Rates 500
Wages 4,500
Sundry Expenses 1,000
Purchases 25,000
Sales 33,000
97,000 97,000
C1 - 26
Features
Trial Balance
C1 - 27
Difference from Balance Sheet
Trial Balance
C1 - 28
Nominal Account
Trial Balance
C1 - 29
Limitations
Trial Balance
C1 - 30
Concepts
Trading and Profit and Loss Account
C1 - 31
Preparation Methods
Trading and Profit and Loss Account
C1 - 32
An Example
Trial Balance Statement
31 December Year 1
Capital 390,000
Cash 30,000
Equipment 50,000
Furniture 30,000
Factory building 500,000
Bank loan 400,000
Office machinery 80,000
Sun’s Ltd 60,000
Purchases 120,000
Sundry Expenses 40,000
Sales 250,000
Moon’s Ltd 250,000
1,100,000 1,100,000
C1 - 33
Purchases
Bal,4,525
Sundry Expenses
Bal,1,600
Sales
Bal,16,84016,840
Trading
16,9609,755
Profit and Loss
Bal,0
Total
Expenses
Total
Revenues
The Closing Process
9,755
9,755
C1 - 34
Wages Expense
Bal,4,525
Rent Expense
Bal,1,600
Depreciation Expense
Bal,50
Utilities Expense
Bal,985
Supplies Expense
Bal,2,040
Insurance Expense
Bal,100
Miscellaneous Expense
Bal,455
4,525
1,600
50
985
2,040
100
455
Fees Earned
Bal,16,840
Rent Revenue
Bal,120
16,840
120
Income Summary
16,9609,755
Retained Earnings Close Revenues
Bal,0
Dividends
Bal,4,000
Close Expenses
The Closing Process
7,205
7,205
Close Income SummaryNet Income
Closed
C1 - 35
Wages Expense
Bal,4,525
Rent Expense
Bal,1,600
Depreciation Expense
Bal,50
Utilities Expense
Bal,985
Supplies Expense
Bal,2,040
Insurance Expense
Bal,100
Miscellaneous Expense
Bal,455
4,525
1,600
50
985
2,040
100
455
Fees Earned
Bal,16,840
Rent Revenue
Bal,120
16,840
120
Income Summary
16,9609,755
Retained Earnings Close Revenues
Bal,0
Dividends
Bal,4,000
Close Expenses
The Closing Process
7,205
7,205
Close Income SummaryNet Income
4,000
4,000
Close Dividends
Dividends
Closed
Closed
C1 - 36
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Expense
Fees Earned
Rent Revenue
Income Summary
Retained Earnings
Bal,0
Dividends
Net Income
Dividends
Bal,3,205
All temporary accounts
now have zero balances
and are ready for the
next accounting period.
7,205
4,000
The Closing Process
C1 - 37
Date Description Debit Credit
Purchase (of goods) 120,000
Trading Account for the year ended 31 December Year 1
Calculating Gross Profit
C1 - 38
Calculating Gross Profit
Date Description Debit Credit
C1 - 39
Financial Statements
NetSolutions
Income Statement
For the Month Ended November 30,2002
Fees earned $7,500
Operating expenses:
Wages expense $2,125
Rent expense 800
Supplies expense 800
Utilities expense 450
Miscellaneous expense 275
Total operating expenses 4,450
Net income $3,050
C1 - 40
Financial Statements
NetSolutions
Income Statement
For the Month Ended November 30,2002
Fees earned $7,500
Operating expenses:
Wages expense $2,125
Rent expense 800
Supplies expense 800
Utilities expense 450
Miscellaneous expense 275
Total operating expenses 4,450
Net income $3,050
C1 - 41
Financial Statements
NetSolutions
Income Statement
For the Month Ended November 30,2002
Fees earned $7,500
Operating expenses:
Wages expense $2,125
Rent expense 800
Supplies expense 800
Utilities expense 450
Miscellaneous expense 275
Total operating expenses 4,450
Net income $3,050
C1 - 42
Financial Statements
NetSolutions
Income Statement
For the Month Ended November 30,2002
Fees earned $7,500
Operating expenses:
Wages expense $2,125
Rent expense 800
Supplies expense 800
Utilities expense 450
Miscellaneous expense 275
Total operating expenses 4,450
Net income $3,050
C1 - 43
NetSolutions
Retained Earnings Statement
For the Month Ended November 30,2002
Financial Statements
Net income for November $ 3,050
Less dividends 2,000
Retained earnings,November 30,2002 $ 1,050
C1 - 44
Net income for November $ 3,050
Less dividends 2,000
Retained earnings,November 30,2002 $ 1,050
NetSolutions
Retained Earnings Statement
For the Month Ended November 30,2002
Financial Statements
C1 - 45
Net income for November $ 3,050
Less dividends 2,000
Retained earnings,November 30,2002 $ 1,050
NetSolutions
Retained Earnings Statement
For the Month Ended November 30,2002
Financial Statements
C1 - 46
Net income for November $ 3,050
Less dividends 2,000
Retained earnings,November 30,2002 $ 1,050
NetSolutions
Retained Earnings Statement
For the Month Ended November 30,2002
Financial Statements
C1 - 47
Note,To see the topic slide,type 2 and press Enter.
This is the last slide in Chapter F1,
Power NotesChapter F1
Introduction to Accounting and Business
Learning Objectives
1,Definitions of Six Basic Accounting Terms
2,Double Entry System
3,Balance Sheet
4,Trial Balance
5,Trading and Profit and Loss Account
6,Journal Entries
Power Notes
Approaching the Subject of Accounting(1)
Chapter 1
C1
C1 - 2
Note,To select a topic,type the slide # and press Enter.
Accounting – An Information Process
Users of Accounting Information
Profession of Accounting
The Accounting Equation
Business Transactions
Financial Statements
Ratio of Liabilities to Stockholders Equity
Slide # Power Note Topics
Power Notes
Approaching the Subject of Accounting(1)
Chapter F1
3
9
11
16
19
53
69
C1 - 3
1.Assets
2.Liabilities
3.Balance Sheet
4.Debtors
5.Creditors
6.Proprietorship
Definitions of Basic Terms
C1
C1 - 4
Double-Entry System
,Double-entry system is based on a simple
concept,each party in a business transaction
will receive something and give something in
return,In bookkeeping terms,what is
received is a debit and what is given is a
credit,The T account is a representation of a
scale or balance.”
Luca Pacioli
Developer of
Double-Entry
System
Scale or Balance
Receive
DEBIT
Give
CREDIT
T account
Left Side
Receive
DEBIT
Right Side
Give
CREDIT
C1 - 5
Resources
The Accounting Equation
What are an organization’s resources called?
C1 - 6
Assets
Resources = Sources
The Accounting Equation
What are the
sources of the
assets?
Cost of
resources used
in the business
C1 - 7
Assets
Liabilities
Stockholders’
Equity
Resources = Sources
Cost of
resources used
in the business
Resources
supplied by
creditors and
owners
The Accounting Equation
C1 - 8
Expanded Accounting Equation
,The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
DEBITS
received
CREDITS
given=
C1 - 9
Expanded Accounting Equation
,The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
DEBITS
received
CREDITS
given=
Assets
C1 - 10
Expanded Accounting Equation
,The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
Assets
DEBITS
received
CREDITS
given=
Expenses
C1 - 11
Expanded Accounting Equation
,The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
Expenses
Assets
DEBITS
received
CREDITS
given=
Liabilities
C1 - 12
Expanded Accounting Equation
,The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
Expenses
Liabilities
Assets
DEBITS
received
CREDITS
given=
Owner’s Equity
C1 - 13
Expanded Accounting Equation
,The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
Expenses
Liabilities
Owner’s Equity
Assets
DEBITS
received
CREDITS
given=
Revenues
C1 - 14
Expanded Accounting Equation
,The basic accounting equation can be
expanded to include all five financial categories
indicating what has been received and given.”
Expenses
Liabilities
Owner’s Equity
Assets
DEBITS
received
CREDITS
given=
Revenues
Net
Income
C1 - 15
Balance Sheet as at (date)
Assets
$
Total $
Liabilities
$
Total $
Balance Sheet
C1 - 16
Balance Sheet of Business A as at Now
Assets
Cash $3,000
Total $ 3,000
Liabilities
$
Total $
Balance Sheet
C1 - 17
Balance Sheet of Business A as at Now
Assets
Cash $30,000
Total $ 30,000
Liabilities
Owing to Mr,Wong $30,000
Total $30,000
Balance Sheet
C1 - 18
Balance Sheet of Business A as at end of Day 1
Assets
Cash $15,000
Equipment 10,000
Stock 5,000
Total $ 30,000
Liabilities
Capital $30,000
Total $30,000
Balance Sheet
C1 - 19
Balance Sheet of Business A as at end of Day 2
Assets
Cash $15,000
Equipment 10,000
Stock 3,400
Debtor – Mr,Chan 600
Total $ 30,000
Liabilities
Capital $30,000
Total $30,000
Balance Sheet
C1 - 20
Balance Sheet of Business A as at end of Day 3
Assets
Cash $5,800
Bank balance 10,000
Equipment 10,000
Stock 4,000
Debtor – Mr,Chan 600
Total $ 30,400
Liabilities
Capital $30,000
Creditor (Mr,Lin) 400
Total $30,400
Balance Sheet
C1 - 21
Balance Sheet of Business A as at end of Day 4
Assets
Cash $5,500
Bank balance 10,200
Equipment 10,000
Stock 4,000
Debtor – Mr,Chan 400
Total $ 30,100
Liabilities
Capital $30,000
Creditor (Mr,Lin) 100
Total $30,100
Balance Sheet
C1 - 22
Assets
Cash $5,500
Bank balance 10,200
Equipment 10,000
Stock 4,000
Debtor – Mr,Chan 400
Total $ 30,100
Liabilities
Capital $30,000
Creditor (Mr,Lin) 100
Total $30,100
Balance Sheet of Business A as at end of Day 4
Balance Sheet
C1 - 23
Assets
Cash $5,500
Bank balance 10,200
Equipment 10,000
Stock 4,000
Debtor – Mr,Chan 400
Total $ 30,100
Liabilities
Capital $30,000
Creditor (Mr,Lin) 100
Total $30,100
Balance Sheet of Business A as at end of Day 4
Balance Sheet
C1 - 24
Trial Balance
Definition and its function
Trial Balance
C1 - 25
Trial Balance
Trial Balance as at (date)
Capital 57,000
Premises 48,000
Equipment 8,000
Cash 3,000
Bank(overdraft) 2,000
Trade Creditors 5,000
Trade Debtors 7,000
Rates 500
Wages 4,500
Sundry Expenses 1,000
Purchases 25,000
Sales 33,000
97,000 97,000
C1 - 26
Features
Trial Balance
C1 - 27
Difference from Balance Sheet
Trial Balance
C1 - 28
Nominal Account
Trial Balance
C1 - 29
Limitations
Trial Balance
C1 - 30
Concepts
Trading and Profit and Loss Account
C1 - 31
Preparation Methods
Trading and Profit and Loss Account
C1 - 32
An Example
Trial Balance Statement
31 December Year 1
Capital 390,000
Cash 30,000
Equipment 50,000
Furniture 30,000
Factory building 500,000
Bank loan 400,000
Office machinery 80,000
Sun’s Ltd 60,000
Purchases 120,000
Sundry Expenses 40,000
Sales 250,000
Moon’s Ltd 250,000
1,100,000 1,100,000
C1 - 33
Purchases
Bal,4,525
Sundry Expenses
Bal,1,600
Sales
Bal,16,84016,840
Trading
16,9609,755
Profit and Loss
Bal,0
Total
Expenses
Total
Revenues
The Closing Process
9,755
9,755
C1 - 34
Wages Expense
Bal,4,525
Rent Expense
Bal,1,600
Depreciation Expense
Bal,50
Utilities Expense
Bal,985
Supplies Expense
Bal,2,040
Insurance Expense
Bal,100
Miscellaneous Expense
Bal,455
4,525
1,600
50
985
2,040
100
455
Fees Earned
Bal,16,840
Rent Revenue
Bal,120
16,840
120
Income Summary
16,9609,755
Retained Earnings Close Revenues
Bal,0
Dividends
Bal,4,000
Close Expenses
The Closing Process
7,205
7,205
Close Income SummaryNet Income
Closed
C1 - 35
Wages Expense
Bal,4,525
Rent Expense
Bal,1,600
Depreciation Expense
Bal,50
Utilities Expense
Bal,985
Supplies Expense
Bal,2,040
Insurance Expense
Bal,100
Miscellaneous Expense
Bal,455
4,525
1,600
50
985
2,040
100
455
Fees Earned
Bal,16,840
Rent Revenue
Bal,120
16,840
120
Income Summary
16,9609,755
Retained Earnings Close Revenues
Bal,0
Dividends
Bal,4,000
Close Expenses
The Closing Process
7,205
7,205
Close Income SummaryNet Income
4,000
4,000
Close Dividends
Dividends
Closed
Closed
C1 - 36
Wages Expense
Rent Expense
Depreciation Expense
Utilities Expense
Supplies Expense
Insurance Expense
Miscellaneous Expense
Fees Earned
Rent Revenue
Income Summary
Retained Earnings
Bal,0
Dividends
Net Income
Dividends
Bal,3,205
All temporary accounts
now have zero balances
and are ready for the
next accounting period.
7,205
4,000
The Closing Process
C1 - 37
Date Description Debit Credit
Purchase (of goods) 120,000
Trading Account for the year ended 31 December Year 1
Calculating Gross Profit
C1 - 38
Calculating Gross Profit
Date Description Debit Credit
C1 - 39
Financial Statements
NetSolutions
Income Statement
For the Month Ended November 30,2002
Fees earned $7,500
Operating expenses:
Wages expense $2,125
Rent expense 800
Supplies expense 800
Utilities expense 450
Miscellaneous expense 275
Total operating expenses 4,450
Net income $3,050
C1 - 40
Financial Statements
NetSolutions
Income Statement
For the Month Ended November 30,2002
Fees earned $7,500
Operating expenses:
Wages expense $2,125
Rent expense 800
Supplies expense 800
Utilities expense 450
Miscellaneous expense 275
Total operating expenses 4,450
Net income $3,050
C1 - 41
Financial Statements
NetSolutions
Income Statement
For the Month Ended November 30,2002
Fees earned $7,500
Operating expenses:
Wages expense $2,125
Rent expense 800
Supplies expense 800
Utilities expense 450
Miscellaneous expense 275
Total operating expenses 4,450
Net income $3,050
C1 - 42
Financial Statements
NetSolutions
Income Statement
For the Month Ended November 30,2002
Fees earned $7,500
Operating expenses:
Wages expense $2,125
Rent expense 800
Supplies expense 800
Utilities expense 450
Miscellaneous expense 275
Total operating expenses 4,450
Net income $3,050
C1 - 43
NetSolutions
Retained Earnings Statement
For the Month Ended November 30,2002
Financial Statements
Net income for November $ 3,050
Less dividends 2,000
Retained earnings,November 30,2002 $ 1,050
C1 - 44
Net income for November $ 3,050
Less dividends 2,000
Retained earnings,November 30,2002 $ 1,050
NetSolutions
Retained Earnings Statement
For the Month Ended November 30,2002
Financial Statements
C1 - 45
Net income for November $ 3,050
Less dividends 2,000
Retained earnings,November 30,2002 $ 1,050
NetSolutions
Retained Earnings Statement
For the Month Ended November 30,2002
Financial Statements
C1 - 46
Net income for November $ 3,050
Less dividends 2,000
Retained earnings,November 30,2002 $ 1,050
NetSolutions
Retained Earnings Statement
For the Month Ended November 30,2002
Financial Statements
C1 - 47
Note,To see the topic slide,type 2 and press Enter.
This is the last slide in Chapter F1,
Power NotesChapter F1
Introduction to Accounting and Business
