College Accounting: A Practical Approach by Slater (13th edition)

College Accounting: A Practical Approach by Slater (13th edition) is the 13th edition of the college textbook that is titled College Accounting: A Practical Approach, has been written by Jeffrey Slater and published by Pearson Education, Inc. Vaughn College of Aeronautics and Technology utilizes this textbook for its Vaughn College MGT120 course.

Chapter 1. Accounting Concepts and Procedures

Chapter 1 definitions

• Accounting. A system that measures the business' activities in financial terms, provides written reports and financial statements about those activities, and communicates these reports to decision makers and others.
• Sole proprietorship. A type of business organization that has one owner. This owner is personally liable for paying the business' debt.
• Partnership. A form of business organization that has at least two owners. The partners usually are generally liable for the partnership's debts.
• Corporation. A form of business organization that is owned by stockholders. Stockholders usually are not personally liable for the corporation's debts.
• Limited Liability Company. A form of business organization that is owned by one or more members. Members are only liable to the extent of their investments.
• Service company. An enterprise that provides one or more services.
• Merchandise company. An enterprise that makes its own products or buys a product from a manufacturer to sell to customers.
• Manufacturer. An enterprise that makes a product and sells it to its customers.
• Generally Accepted Accounting Principles. The procedures and guidelines that must be followed during the accounting process.
• International Financial Reporting Standards. A group of accounting standards and procedures that if adopted by the United States could replace GAAP.
• Bookkeeping. The recording function of the accounting process.
• Assets. Properties (resources) of value such as cash, sup;lies, equipment, or land owned by an organization.
• Equities. The rights of financial claims of creditors (liabilities) and owners (owner's equity) who supply the assets to an organization.
• Liabilities. Obligations that come due in the future. Liabilities are the financial rights or claims of creditors to assets.
• Creditor. Anyone who has a claim to assets.
• Owner's equity. Rights of financial claims to the assets of an organization. In the basic accounting equation, assets minus liabilities).
• Basic accounting equation. Assets = Liabilities + Owner's equity.
• Capital. The owner's investment of equity in the organization.
• Supplies. The type of assets acquired by an organization that has a much shorter life than equipment.
• Shift in assets. A shift that occurs when the composition of the assets has changed but the total of the assets remains the same.
• Accounts payable. Amounts owed to creditors that result from the purchase of goods or services on account -- a liability.
• Balance sheet (also known as statement of financial position). A financial statement, as of a particular date, that shows the amount of assets owned by an organization as well as the amount of claims (liabilities and owner's equity) against these assets.
• Cash basis. An accounting system that records revenue when cash is received and expenses when paid. This system does not match revenues and expenses like in the accrual basis of accounting.
• Accrual basis. An accounting system that matches revenues when earned with expenses that are incurred.
• Revenue. An amount earned by performing services for customers or selling goods to customers; it can be in the form of cash or accounts receivable. Revenue is a subdivision of owner's equity: As revenue increases, owner's equity increases.
• Accounts receivable. An asset that indicates the amount owed by customers.
• Expenses. A cost incurred in running a business by consuming goods or services in producing revenue. Expenses is a subdivision of owner's equity.
• Net income. The financial result of operations when revenue totals more than expenses.
• Net loss. The financial result of operations when expenses total more than revenue.
• Withdrawals. A subdivision of owner's equity that records money or other assets an owner withdraws from a business for personal use.
• Expanded accounting equation. Assets = Liabilities + Capital - Withdrawals + Revenue - Expenses.
• Income statement. An accounting statement that details the performance of an organization (revenue minus expenses) for a specific period of time.
• Statement of owner's equity. A financial statement that reveals the change in capital. The ending figure for capital is then placed on the balance sheet.
• Ending capital. Beginning Capital + Additional Investments + Net income - Withdrawals = Ending Capital. Or Beginning Capital + Additional Investments - Net loss - Withdrawals = Ending Capital

Chapter 1 problem

Data. Michael Brown opened his law office on June 1, 2018. During the first month of operation, Michael conducted the following transactions:

1. Invested $6,000 in cash in law practice.
2. Paid $600 for office equipment.
3. Purchased additional office equipment on account, $1,000.
4. Received cash for performing legal services for clients, $2,000.
5. Paid salaries, $800.
6. Performed legal services for clients on account, $1,000.
7. Paid rent, $1,200.
8. Withdrew $500 from his law practice for personal use.
9. Received $500 from customers in partial payment for legal services performed in transaction (6).

Requirements:

1. Record these transactions in the expanded accounting equation.
2. Prepare the financial statements at June 30 for Michael Brown, Attorney-at-Law.