2. Chapter 1: An Introduction to Bookkeeping
Chapter Objectives
After completing this chapter, you will be able to:
define the three forms of business organization
define the five categories of accounts: assets, liabilities,
owner’s equity, revenues, and expenses
classify accounts according to the five categories
identify the generally accepted accounting principles
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3. Chapter 1: An Introduction to Bookkeeping
What is bookkeeping?
Keeping track of money-related activities for an
individual or a business
What kinds of money-related activities?
Cash received
Cash paid out
Sales
Purchases
Others activities
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6. Marvin can save 205 each month.
Cash in
(deposits)
Cash out
(cheques)
Pay 672.50
672.50
Rent
Utilities
Food
Car
Misc
450,00
140,00
200,00
195,00
135,00
1345.00 1140.00
7. If he needed a loan
Things he owns
(cash, or their value in
cash!)
Debts he owes
Cash
Car
Furniture
Savings
bond
1135.00
1500.00
2000.00
2500.00
Credit
cards
Tailor
Garage
450.00
390.00
270.00
7135.00 1110.00
8. 1-8
Chapter 1: An Introduction to Bookkeeping
Personal Bookkeeping
Cash received
Cash paid out
Things owned
Debts owed
Bookkeeping for Business
Cash received
Cash paid out
Sales
Purchases
Things owned
Debts owed
9. Lance – Cash in, Cash out
Cash in
Revenue
Cash out
Expenses
J. Tinnicliffe
L. Porth
B. Szuuts
D. Essig
32.00
25.00
27.00
20.00
Gas
Bags
Misc.
16.00
14.50
5.00
104 35.50
10. Lance Reed– what his business
owes and owns
Things owned
Assets
Debts owed
Liabilities
Lawnmower
Tools
250.00
40.00
Loan 120.00
290.00 120.00
11. Chapter 1: An Introduction to Bookkeeping
Financial Statements: Balance Sheet
The balance sheet shows what you own (assets) and
the debts you owe (liabilities). Equity is the difference
between assets and liabilities.
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13. Chapter 1: Three Forms of Business Organization
Every business is one of the three forms of business organization:
Proprietorship
Partnership
Corporation
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14. Chapter 1: Three Forms of Business Organization
Proprietorship
A business with only one owner.
The owner is the manager, the owner
makes all the business decisions, and
the owner is responsible for all the
debts of the business.
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15. Chapter 1: Three Forms of Business Organization
Partnership
A business owned by two or more
persons (called partners).
The partners share the management
and decision-making.
Each partner is responsible for the
debts of the business.
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16. Chapter 1: Three Forms of Business Organization
Corporation
A business that operates under a
government charter.
Owners are called shareholders or
stockholders.
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17. Resources to start a business….
Lance decides to start a business…
Google “ starting a small business in
Ontario”
18.
19. Keeping business records….
Business records
You're required by law to keep thorough, organized
books and records—and, in the case of income tax, you
have to hold onto them for at least six years after the
taxation year they relate to.
This can be somewhat onerous, particularly if you hire
employees.
If you have an accountant, he/she can either set up and
do your books for you, help find you a good bookkeeper
(bookkeepers are generally less expensive than
accountants) or recommend a good bookkeeping and
accounting software program so you can do it yourself.
20. Chapter 1: Five Classes of Accounts
Every business divides its accounts into five classes:
Assets
Liabilities
Owner's Equity or Capital
Revenues
Expenses
See pg 9 in text
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21. Chapter 1: Five Classes of Accounts
Assets
Things of value, owned by the business.
Examples include cash, buildings, equipment,
merchandise for sale.
Liabilities
Debts owing to others.
Examples include bank loans and mortgages.
Owner's Equity
The value of assets that remains after all debts have
been paid off.
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