Future Profit - WHS Accounting

The Westwood Schools Introduction to Accounting Course taught by Mrs. Davis.

This is where we will post our daily topics of discussion and invite business leaders to contribute and share with the class as we learn about accounting.

Tuesday, August 15, 2006

Chapter 1 section 2 notes

Chapter 1 Section 2 (pages 6 (starts on page 9) -12)

Ø Concepts
o Concept of Business Entity
§ Is applied when a business’s financial information is recorded and separated from owner’s personal financial information.
§ The business can be owned by one person or a company.
§ You can not pay out personal expenses from the business even if it is privately owned by one person or not.

o Concept of Unit of Measurement
§ Measured in dollars or some type of value.
§ It can not be in different currencies

Ø Transaction #1 Page 9
o Receive cash from owner as an investment
o You must add the amount received to the liabilities and the owner’s equity so that both sides equal out to the same amount
o Remember the rule of thumb in math. If you do one thing to one side then you must do it to the other.

Ø Transaction #2 Page 10
o You have a plus and a negative and when you have both they add out to zero
o Your capital is never changed and you pull everything down

Ø Transaction #3 Page 10
o You take money out of cash and put it into the prepaid (asset) amount and again it is a plus and minus so it equals out to a zero.
o Your capital again does not change because you don’t touch it or need anything out of it.

Ø Transaction #4 Page 11
o When taking money out from a liability account (Buying with no money (loaning)) it goes over to your assets as the same amount (even though you borrowed the money it is not a minus on your liabilities).
o After all your transactions you will minus the amount of money that you owe to the liabilities.

Ø Transaction #5 Page 11
o Paying back liability out of cash (asset)
o Subtract from your asset (cash) and then transferred to pay off your liability.
o In doing all of that it keeps both sides equal.

Ø Accounts Payable: is a liability account which means that it has to be paid

Ø Anything prepaid is a asset

Ø Capital Account: is a owners equity

Ø A/P: the abbreviation for accounts payable

Ø Both sides of the accounting equation must always equal


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