3. Property Glencoe Accounting Property and Financial Claims Section 3.1 The purpose of accounting is to provide: Financial information about property Financial claim to property property Anything of value that a person or business owns. financial claim A legal right to property.

4. Property Glencoe Accounting Property and Financial Claims Section 3.1 A creditor lends you money. You buy something on credit . The financial claim is shared. credit When you buy something and agree to pay for it later. creditor Any person or business to which you owe money.

5. Property Glencoe Accounting Property and Financial Claims Section 3.1

6. Financial Claims in Accounting Glencoe Accounting Property and Financial Claims Section 3.1 Assets Cash Office Equipment Manufacturing Equipment Buildings Land assets Property or items of value owned by a business.

7. Financial Claims in Accounting Glencoe Accounting Property and Financial Claims Section 3.1 Equity Owner’s Equity equity The accounting term for the financial claim to assets. owner’s equity The owner’s claim to the assets of a business.

8. Financial Claims in Accounting Glencoe Accounting Property and Financial Claims Section 3.1 The Accounting Equation liabilities Amounts owed to creditors; the claims of creditors to the assets of a business.

10. Business Transactions Glencoe Accounting business transaction An economic event that causes a change—either an increase or decrease—in assets, liabilities, and/or owner’s equity. Section 3.2 Buying a sweater or putting cash in your savings account are examples of business transactions . Transaction That Affect Owner’s Investment, Cash, and Credit

11. Business Transactions Glencoe Accounting Section 3.2 A business records changes in subdivisions called accounts . Accounts receivable Accounts payable account A subdivision under assets, liabilities, or owner’s equity. Transaction That Affect Owner’s Investment, Cash, and Credit

12. Business Transactions Glencoe Accounting A business records changes in subdivisions called accounts. Accounts receivable Accounts payable accounts receivable The total amount of money owed to a business—money to be received later because of the sale of goods or services on credit. accounts payable The amount owed, or payable, to the creditors of a business. Section 3.2 Transaction That Affect Owner’s Investment, Cash, and Credit

13. Business Transactions Glencoe Accounting Section 3.2 Steps for analyzing a business transaction Identify the accounts affected. Classify the accounts affected. Determine the amount of increase or decrease for each account affected. Make sure the accounting equation remains in balance. Transaction That Affect Owner’s Investment, Cash, and Credit 1 2 3 4

14. Transactions and the Accounting Equation Glencoe Accounting Section 3.2 Analyze a cash investment transaction: investment Money or other property paid out in order to produce a profit. Christa Vargas took $25,000 from personal savings and deposited that amount to open a business checking account in the name Zip Delivery Service. See page 58 Transaction That Affect Owner’s Investment, Cash, and Credit Business Transaction 1

15. Transactions and the Accounting Equation Glencoe Accounting Section 3.2 Business Transaction 2 Christa Vargas transferred two telephones valued at $200 each from her home to the business. See page 59 Transaction That Affect Owner’s Investment, Cash, and Credit

16. Transactions and the Accounting Equation Glencoe Accounting Section 3.2 Analyze a cash purchase business transaction: Business Transaction 3 Zip issued a $3,000 check to purchase a computer system. See page 59 Transaction That Affect Owner’s Investment, Cash, and Credit

17. Transactions and the Accounting Equation Glencoe Accounting Section 3.2 Analyze a purchase on account business transaction: on account When a business buys an item on credit. Business Transaction 4 Zip bought a used truck on account from Coast to Coast Auto for $12,000. See page 60 Transaction That Affect Owner’s Investment, Cash, and Credit

19. Revenue and Expense Transactions Glencoe Accounting Section 3.3 Examples of Revenue Fees earned for services performed Cash received from the sale of merchandise revenue Income earned from the sale of goods or services. Transaction That Affect Revenue, Expense, and Withdrawals by the Owner

20. Revenue and Expense Transactions Glencoe Accounting Section 3.3 Examples of Expenses Rent Utilities Advertising expense The cost of products or services used to operate a business. Transaction That Affect Revenue, Expense, and Withdrawals by the Owner

21. Withdrawals by the Owner Glencoe Accounting Section 3.3 Withdrawals decrease assets and owner’s equity. Investments increase assets and owner’s equity. withdrawal When the owner takes cash or other assets from the business for personal use. Transaction That Affect Revenue, Expense, and Withdrawals by the Owner

22. Glencoe Accounting Question 1 O’Donnell’s Car Wash has the following assets and liabilities. Assets: Cash in Bank $9,500; Accounts Receivable $500; Computer Equipment $3,500; Car Wash Equipment $75,000; Building $450,000 Liabilities: Alto’s Equipment Service $2,500; First National Bank (mortgage on building) $200,000 What is the owner’s equity for O’Donnell’s? Step 1 Calculate total assets. $9,500 + $500 + $3,500 + $75,000 + $450,000 = $538,500 Step 2 Calculate total liabilities. $2,500 + $200,000 = $205,500 Step 3 Calculate owner’s equity . $538,500 - $202,500 = $336,000