Written by Ruby Ann Sawyer, Brantley County Middle School
Introduction to Accounting
the system of recording and summarizing financial transactions and analyzing, verifying, and reporting the results
http://www.merriam-webster.com/dictionary/accounting
What is accounting?
Everyone! Businesses use accounting information to run
the business.Investors use it to make decisions about whether
to buy a company’s stocks.Creditors use it to make decisions about whether
to loan money to a company.IRS use it to determine how much taxes the
company must pay.Customers use the information to determine
which company to purchase products or services from (you want a company that is going to be around in the future).
Who uses accounting?
Lesson 1: Introduction To
Accounting
Assets – things you ownLiabilities – a debt or obligation (money
owed)Owner’s Equity – the amount of the initial
investment plus retained earnings.Income – a monetary gain (usually from the
sale of products or services)Expenses – financial burdens; cost
Key Terms
AssetsLiabilitiesOwner’s EquityIncome Expenses
Vocaublary Quiz – Word Bank…
Credit – An entry on the right side of an account – decreases assets or increases liabilities.
Debit – An entry on the left side of an account – increases assets or decreases liabilities.
Key Terms
AssetsLiabilitiesIncomeExpenses
Let’s review…
Terminology Activity
What are some of your own assets?What are some of you own liabilities?What are some of your own incomes?What are some of your own expenses?
Class Discussion
Credit – the entry on the right side of an account
What is credit & debit?
Account Name
CreditDebit
• Debit – the entry on the left side of an account
Example of Debit & CreditAsset Account
In this example, your parents gave you $150 cash and you spend
$100 on clothes.
Asset Account
Credit
Decreases
Debit
Increases
Type of Account
Example of Debit & CreditAsset Account
What is the balance of your cash account?
$100$150
Cash
In this example, your parents gave you $150 cash and you spend
$100 on clothes.
$50
Asset Account
Credit
Decreases
Debit
Increases
Type of Account
Balance Sheet - An official financial statement that includes the company’s assets and liabilities. It determines the value of the company by subtracting liabilities from assets.
Income Statement - A financial statement of a company’s operation. Shows a company’s income, expenses, and income for a period of time. Shows the company’s profit or loss for a given period of time.
Financial Statements
What are debits? credits?What are the basic account types?What is an Income Statement?What is a Balance Sheet?
Let’s get started!
BCS III – Accounting UnitEssential Questions
Lesson 2: The Balance Sheet
An official financial statement that includes the company’s assets and liabilities.
It determines the value of the company by subtracting liabilities from assets.
What is a balance sheet?
(Company Name)Balance Sheet
December 31, 20--
ASSETS LIABILITIES
Cash $10,000 Accounts payable $15,000
Inventory 20,000 Mortgage (Property & Equipment) 125,000
Equipment, Furniture, Fixtures 75,000 Interest Payable 15,000
Property 100,000 Owner's Equity
Capital stock $50,000
TOTAL ASSETS 205,000 TOTAL LIABILITIES & EQUITY 205,000
Instructions:Create the above spreadsheet.Enter formulas for Total cells.Title in font Arial size 16.Everything else in font Arial size 10Merge and Center the three title lines.Bold headings and totals.Format for currency.
Sample Balance Sheet
Open Excel.Save the document as “Sample Balance
Sheet”Create the sample balance sheet exactly as
you see it on your handout. Don’t forget to save frequently.
You try it…
Lesson 3: The Income Statement
A financial statement of a company’s operation.
Shows a company’s income, expenses, and income for a period of time. Shows the company’s profit or loss for a given period of time.
What is an income statement?
(Company Name)Income Statement
For Month Ended December 31, 20--Income
Sales $10,000 Interest Income 50 Total Income $10,050
ExpensesAdvertising $700 Bank Charges 50 Charitable Contributions 100 Insurance 750 Miscellaneous 50 Office Expense 75 Rent 1000 Repairs and Maintenance 250 Supplies 750 Telephone 45 Utilities 550 Wages 4000 Total Expenses $8,320
Net Income (Loss) $1,730
InstructionsCreate the above spreadsheetMerge and Center the three title lines.Bold the title lines and change font to size 16.Bold headings and total lines.Add bottom border for Total Income and Total Expenses.Add double bottom border for Net Income (Loss).Add the appropriate formulas for Total Income, Total Expenses, and Net Income (Loss).
FormulasTotal Income = Sales + Interest IncomeTotal Expenses = all expensesNet Income (Loss) = Total Income - Total Expenses
Open Excel.Save the document as “Sample Income
Statement.”Create the sample balance sheet exactly as
you see it on your handout. Don’t forget to save frequently.
You try it…
Lesson 4: Accounting Review
and Test
Terminology Review
Select the appropriate financial statement (Balance Sheet or Income Statement) for each accounting classification.
Assets _______________Expenses______________Income _______________Liabilities______________Owner’s Equity _________
Accounts Payable_________________________Accounts Receivable _________________________Cash _________________________Furniture & Fixtures _________________________Inventory _________________________Line of Credit _________________________Mortgage _________________________Supplies _________________________
Select the appropriate accounting classification (asset or liability) for the following
accounts.
Advertising _________________________Interest Income _________________________Rent _________________________Repairs _________________________Salaries _________________________Sales _________________________Utilities _________________________
Select the appropriate accounting classification (income or expense) for the following accounts
TEST is tomorrow!