Lesson 1-1 - New Bremen Local Schools

Report
1
GOLD’S GYM
 Franchise – individuals/groups buy the right to open
and operate a Gold’s Gym
 Items to consider when opening a new Gold’s Gym:
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How big should facility be?
What equipment to include?
How to let people know about the new facility
Location
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1
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GOLD’S GYM
 Why is location of a business important to the
success of that business?
 If difficult to get to, customers may not make the effort
 Not enough parking, customers will not find it convenient
 If business depends on drop-in customers, it should be
located where there is high vehicular or pedestrian traffic
 If difficult to enter or exit the business, customers may not
return
 If customers must walk from parking lot to get to business,
parking lot should be lighted
 Beneficial to have other popular businesses in the area to
attract customers
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1
3
GOLD’S GYM
 What things would you consider when deciding where
to locate a business such as Gold’s Gym?
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Lighted parking lot
Accessibility to major roads
Ample parking
Proximity to public transportation
Other popular businesses in the area (Kmart in St. Marys)
Easy entrance/exit
High vehicular and pedestrian traffic (Coffee Shop)
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1
4
Forming & Dissolving a Proprietorship p. 7
 In groups of 3, complete the following:
1. Read Business Structures – Forming and Dissolving a
Proprietorship
2. Answer the following questions:
A. Why do you think more businesses are organized as
proprietorships than any other form of business organization?
B. What kinds of people do you think would be most successful as
owners of a proprietorship?
C. List some advantages of a proprietorship
D. List some disadvantages of a proprietoship
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1
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Answers
A. Why more proprietorships?
 Proprietorships are the easiest way to organize a
business.
 Owner has the authority to totally control every
aspect of the business and does not have to get
permission from a partner or from stockholders to
make major changes, etc.
B. What kinds of people would be successful?
 Creative, willing to take a risk, self-motivated, good
manager of time, enjoys being in charge, not afraid
of responsibility, ample knowledge related to the
business, good marketing and planning skills
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Answers
C. Advantages:
 Ease of formation/dissolving, Total control by owner,
and profits are not shared
D. Disadvantages:
 Limited resources, Unlimited liability, Limited
expertise, Limited life, Obligation to follow laws of
federal, state, and city in which business is formed
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1
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What is Accounting?
 Planning, recording, analyzing, and interpreting
financial information is called Accounting.
 A planned process for providing financial information
that will be useful to management is called an
Accounting System.
 Organized summaries of a business’s financial
activities are called Accounting Records.
 Accounting is the “Language of Business”
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1
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What is Accounting?
 Many individuals in a business complete accounting
forms and prepare accounting reports
 Owners, managers, and accounting personnel use
their knowledge of accounting to understand the
information provided in the accounting reports.
 Regardless of a person’s responsibility within an
organization, it is EXTREMELY beneficial to have a
background knowledge of accounting.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1
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What is Accounting?
 Financial Statements are financial reports that
summarize the financial condition and operations of a
business.
 Can anyone name some financial statements?
 Uses of Financial Statements:
 Business owners and managers use these statements to
make business decisions
 Suppliers that are considering extending credit to a business
and banks that are considering extending loans to a
business will look at a business’s financial statements before
granting credit or issuing a loan to the business
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1
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Accounting Tidbits…
 Inaccurate accounting records often contribute to
business failure and bankruptcy
 Failure to understand accounting information can
result in poor business decisions for businesses
 Nearly everyone earns money, must submit income
tax reports to the gov’t
 Everyone must plan ways to keep spending within
available income in both your personal and business
lives.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1
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TechKnow Consulting
 Service Business – a business that performs an
activity for a fee
 Examples???
 Proprietorship – A business owned by one person;
also known as sole proprietorship
 Kim Park is the owner
 Sets up and troubleshoots computer networks
 Rents office space and the equipment needed to
troubleshoot network problems
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1
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TechKnow Consulting
 Kim Park must design the accounting system since
this is a new business – set up accounts, etc.
 Kim must keep her business records separate from
her personal records
 Ex. – Kim owns a house and personal car. TechKnow’s
accounting records must not include these items
 Ex. – Kim must have a checking account for her personal
expenses and a separate account for TechKnow Consulting
 Accounting Concept: Business Entity
 Is applied when a business’s financial information is
recorded and reported separately from the owner’s personal
information
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1
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FUNDAMENTAL ACCOUNTING TERMS
page 8
 Assets – anything of value that is owned
 Assets have value because they can be used either to acquire other
assets or to operate a business
 Ex. - Cash, Supplies
 Equities – Financial rights to the assets of a business
 Two Types:
 1) Equity of those that the business owes money to (TechKnow may
buy supplies from Office Depot and agree to pay for them at a later date.
Office Depot has a right to some of TechKnow’s assets until TechKnow
pays for the supplies
 Liabilities – an amount owed by a business
 2) Equity of the Owner (Kim Park will own the business and invested
some of her own money into the business. She has a right to some of the
assets)
 Owner’s Equity - the amount remaining after the value of all liabilities is
subtracted from the value of all assets
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1
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THE ACCOUNTING EQUATION
page 8
 The relationship among assets, liabilities, and owner’s equity can be
written as an equation.
 An equation showing the relationship among assets, liabilities, and
owner’s equity is called the Accounting Equation.
 THE ACCOUNTING EQUATION MUST ALWAYS BE IN BALANCE
 The Left side of the equation must always equal the Right side of the
equation
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1
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The Accounting Equation - Remember
Assets = Liabilities + Owner’s Equity
A = L + OE
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-1

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