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!