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The Accounting Equation. 1. What does a person require in order to begin a business?. Capital- Owner investment or outside investors Equipment, furniture, computers. Assets (own). 2. In general, the term given to all the above items is ____________
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1. What does a person require in order to begin a business? • Capital- Owner investment or outside investors • Equipment, furniture, computers
Assets (own) 2. In general, the term given to all the above items is ____________ 3. How does the business acquire the needed economic resources? a) ________________ b)___________________ creditors will have claims the owner will have claims against the economic against the economic resources. resources. Owner’s Equity (Owner’s Investment) Liabilities (Borrow)
Owner’s Equity + Assets Liabilities = • The ACCOUNTING EQUATION: __________________________ ______________________ $100,000 $70,000 $30,000 5. The accounting equation is a: - Fundamental concept and basis for all accounting today
Question: • On Sept. 15 of the current year, Donna Lyon began the practice of law under her name. Her business’s assets and liabilities on the date are as follows: • Accounts payable $200, Cash $800; Bank loan $1 200, Office Equipment $2 200; Law Books $2 400. • Determine the Owner’s Equity and construct an accounting equation that itemizes the three elements, A, L, & OE. Owner’s Equity + Assets Liabilities = Cash $800 Office Equipment $2,200 Law Books $2,400 Accounts Payable $200 Bank Loan $1200 - = $5,400 = $1,400 = $4,000
Homework: • Answer Exercise #1-6 p. 20 (t), p. 6-7 (w)
