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hello, i hope everybody's semester is startingout well. this is the first official lecture of accounting 01. now, everybody should havehad a previous session where we talked about class policies. for you face to facers wedid that last time we didn't film that, and for you people at home i did a separate filmingand taping of going through the class policies for you, so please make sure those folks athome are taking this as an online class that you watch that don't just skip it thinkingit's not going to be important. it's very important to succeed in this class i wantyou to know how we're going to do things so, for the people watching at home on you-tubeor on dvds, or on that cable tv channel never skip the lectures ok, watch them in sequencewatch the whole thing. if you try to shortcut

it you'll do yourself harm so, at this pointeverybody knows the class policies and procedures and everything we're going to go ahead, andstart the subject of accounting now, i always like to say at the very beginning some peoplehave to take this class, and it's like "oh i wish i didn't have to take this, but i haveto it's required" some people want to take it. truth be told out of the fifteen of youhere there's maybe only one or two who want to be a full-time accountant someday so sometimesthe question comes up "why do we have to take accounting", and i'll tell you. several reasons,but one of them is statistically speaking about half of you are going to own, or co-owna business sometime in your life. now it may not be your sole source of making money, butit may be just an ancillary income, but you

will own or co-own a business. now i've talkedto some of you, and a lot of my students they want to be entrepreneurs, they want to owna business someday. well if you do that you need to know accounting at least at some level,and you might say "well i'll just hire somebody to do my accounting", but what's the problemwith that? anybody know? it costs money, and what's the other one? you might get rippedoff. you can look at the business section, and see what happens when a business ownergives all of their accounting responsibilities to somebody else. it's like "will we trustthat person?" i could tell you horror story after horror story from my days as a financialstatement auditor of small businesses that somebody ripped them off, because that persondidn't know accounting at all. so, maybe you

won't do all the book keeping, but you atleast at some level need to know accounting. accounting is the language of business, plus,wherever you all end up working there's going to be a bottom line. there's going to be anet income that you need to meet, right, i mean jccc isn't out for profit, but we concentrateon that bottom line too. we have to stay afloat don't we? in your own homes you have financialsituations right? so, the language of business is accounting, it's very important to know,so i know there are a lot of reasons for being in this class, but i want you to rememberthat there's basic concepts of business, and how important it is to apply to accounting.the first thing i want to do is go over and you should have the powerpoint slides foryou folks here in the face to face. i handed

these out to you, and for you folks at home,i have these on angel under the lessons tab. i thinks it's very beneficial to have theseso, you don't have to copy everything down that's on the screen, and you can just takenotes to the side, or however you'd like to do it. let's go ahead and go through the veryfirst slide for chapter one, and that is going to be kind of the definition of accounting.i spend a lot of time on this slide so don't think that every slide we do we'll spend thismuch time on, but i think this is a real nice definition, and i'm not the type of teacherwho's going to give you a test question that says "write out the definition of accounting",because truth be told you can find another text-book, and it probably would be slightlydifferent, but this one has a lot of good

aspects, and i want to concentrate on thata little bit. it says accounting is a system that identifies, records, and communicatesinformation that is relevant, reliable, and comparable to help users make better decisions.let's go off the powerpoint, and come back and i want to step away from that for a second,and take you to a different example i think will help flesh out that definition. let mewrite something down here that has absolutely nothing to do with accounting, and tell meif anybody knows what i'm doing? i'll give you a clue it has to do with sports. i'm sureyou're all like what is he doing? right, any idea what that is? anybody want to make aguess? it has to do with basketball. anybody here play basketball? you've watched basketballright? you know what a free throw is right?

it's when a player gets fouled they go tothe line, and they shoot free throws, right? well, one of the things i did in high school(i love basketball still do), but i couldn't make the basketball team at my high, what i did and this sounds like a geeky future accounting professor thing to do - ikept stats for the basketball team. traveled around with them, and kept stats. so, let'sgo back to this do you see how this applies to free-throws. what this meant is playertwelve got fouled, and he went to the line for two free-throws he missed the first one,so i didn't color in that bubble, and he made the second so i colored that in, you withme? okay then player seventeen got fouled for two shots he made both of them so i coloredin the bubbles. number nine player got fouled,

and that looks a little different doesn'tit? anybody want to venture a guess what that is? not a technical - do you know what a oneand one is? certain types if you get fouled you don't get two free-throws, but if youmake the first one you get a second attempt. does that make sense? so i would draw thatkind-of like a little cherry. so, this guy got fouled and he made the first one, so hegot a second attempt, right? if he wouldn't have made the first one it would have justlooked like that. this one has just one bubble, what does that mean? anybody want to guess?he made the shot, but he got a free-throw so, if you get fouled while making a shotyou make the basket, you get one free-throw. now, why do i show you this, because thishas nothing to do with accounting? well this

is one of the things as a basketball statisticianthat i kept track of for the coaches. now, the next day when i would come to school doyou think the coach wanted me to hand him this report, with the bubbles? go back tothe screen do you think that this is what they wanted? what did they want? they wanteda condensed report, and i made out just a sample report ok, this is kind-of what theywanted. this is a free-throw report for northwest vs. southeast on october 20, 2011. this isthe player jones. this is the free-throws attempted eight, and he made 4 free-throws,so he shot fifty percent. smith went to the line, and attempted ten free-throws only madeeight, and shot eighty percent, do you see what i'm saying? this was the report i gavethe coach. now, why would the coach care about

having this information? to know who the bestfree-throw shooters are may be there's a technical during the game, and who would you want toput to the line, probably your best free-throw shooter, right. you'd want to know who needsto work on free-throws, who's getting better, who's getting worse, right. do you agree ifyou were a basketball coach a report like this would help you make better decisions,is that correct? let's go back to the powerpoint definition, and let's apply this to the basketballexample i just gave. that was a system that identified, recorded, and communicated, wasn'tit? for instance i would hear the whistle blow, and it would identify that i need torecord something, correct? it identified that somebody was going to go to the line, andi needed to record it with that little bubble

method, and there's nothing magical aboutthat little bubble method. i didn't make it up as a common way to keep track of free-throws.eventually i would need to communicate that to my coach, right. now, i would communicateit so it would help him make better decisions. however, for it to be able to help him tomake a better decision, it had to be relevant, reliable, and comparable, what does that mean?let's talk about that, what does it mean to be relevant? to be relevant means it needsto be in regards, to the game that he's concerned about, right? what if i were to give him thefree-throw statistics for the 1972 olympic games between russia and u.s.a., is that relevant?is that going to help him make a better decision? no. so, it has to be relevant, it has to berelated to what he's concerned about. it has

to be reliable. what if i don't know whati'm doing as a statistician - is it going to help him make better decisions? no. whatif i told him "hey coach, here's your report for last night, but i'm going to be honestwith you i was pretty drunk when i did it, there's a lot of mistakes, i fell asleep duringthe third quarter... don't know how reliable it is. is it going to help him at all? no,and i did not drink as a high school student. note that if my mom is watching. the thirdone - it has to be comparable, what does that mean? what that means is there has to be aconsistent method that we are using to keep track of this stuff, there has to be rules.for instance we always count a free-throw made if it goes through the hoop, right? whatif i said "i changed the rules i started to

count the free-throws even if it just hitthe rim and even if it didn't go through, well i changed the rules." is that the waywe've been doing it? no. ok so it's no longer comparable to previous games. is it goingto help him make a better decision? no. go back to that one more time this was a systemthat identified, recorded, and communicated, and if it was relevant, reliable, and comparableit would help him make better decisions. accounting is the same way; now let's stay on this fora second. we identified things that needed to be recorded these will be transactionsthat need to be recorded such as, buying office supplies, or selling services to a customer,or paying our employees, or getting a loan from the bank. we record that information,and eventually we're going to communicate

it through a report, through a summation likeyou were saying. and if that information is relevant, and if it is reliable, and if itis comparable we're following the rules, it will help our users make better decisions.what sort of decisions would you see in the business world that would be aided by financialinformation presented to them in a report? do i want to invest in this company? maybe,do i want to extend credit, or make a loan to this company? how's the business doing?are we going to have enough cash to pay salaries next month? right, if you have a businessyou want to have accurate financial information, financial reports - that's what accountingis about. does that flesh that out a little bit for you? let's move on a little bit, ilike to have our lectures be a mixture of

me talking, and then maybe taking a breakand doing some exercises and then going over those. i don't like it just to be me talking,but like i always have to say this first lecture is a lot of me talking, because we reallyhaven't done anything yet. so please don't be concerned if you're going "gosh... arewe just going to have to listen to this guy every fifty minutes every time?" no, we'llbe doing stuff that's why i want you to bring your textbooks and your calculator to class.there will be a lot of times where we take breaks, and you'll work on it for a while,but this lecture is kind of me jumping around and giving a lot of basic business concepts,so we can start to build our foundation. alright let's go on, there are two sets of users ofaccounting information. there are external

users, and there are internal users. externalusers are those that do not work at the company. they work outside of the company such as,lenders, or banks, or credit unions, or share holders, or stock holders, or potential shareholders and stock holders, the government, consumer groups, customers, external you know what an audit is? an audit is when you go in and you look at the recordsof a company, and you verify it. sometimes people think of an irs audit. all of thoseindividuals are external to the company, correct? they don't work there, they're just they'reoutside the company. now, external user's financial accounting is the accounting thatserves external users primarily, and that's this class. now, there are also internal users,these are the people that work at the company

such as, managers, or the sales staff, orthe internal auditors. some companies are so big for instance; sprint, they have theirown internal audit department they're internal within the company. there's also the controller,do you know what a controller is? the controller is the chief accounting individual. he orshe is in charge of all the accounting - they're called the accounting controller, but allof those individuals are internal to the company. now, the type of accounting that is mainlyconcerned with internal users is managerial accounting. have you heard of managerial accounting?does anybody already know they're going to have to take managerial accounting? a lotof people will take financial accounting which is mainly concerned of the external users,and then they eventually take managerial accounting

which is the internal users. alright, let'sgo to the next slide just like there are rules of basketball that must be followed thereare rules of accounting that must be followed, and this will help insure that the informationremains relevant, reliable, and comparable, and we know it has to be those three thingsfor it to be useful. so, there are what's called generally accepted accounting principlessometimes we abbreviate that gaap (g double a p) these are the rules that have been putinto place that we have to follow for accounting. we'll start learning some of those. now, whosets those rules? those are set by what is called the financial accounting standard board,and we abbreviate that sometimes the fasb. this is the private group that sets the rulesof accounting. now, they take input from a

lot of different groups such as the sec thesecurity and exchange commission, have you heard of that group? they're the governmentbody that has the reporting rules for companies that trade stock, and issue stock to the publicthey certainly have input to the fasb on what gaap is. there's also something called theinternational accounting standards board, and they deal with international standardsok, so they certainly have input to the fasb as well. now, one thing about internationalstandards is that we're becoming a much smaller world in some ways, aren't we? have any ofyou going to these classes, have any of you ever skyped, do you know what skyping is?have you ever skyped to somebody overseas? have you ever purchased something over theinternet overseas? if i were to ask this in

an accounting class twenty years ago i probablywould get responses like this - first of all you would say: what is skype, second thingyou wouldn't think about buying something from somebody in germany for example, becauseit's just not possible. but with technology, with communications we're becoming a smallerworld aren't we? it's always interesting with these accounting lectures being on youtubei'll get emails from people in poland, saudi arabia, london, all over the world that somehowthey stumble upon these lectures, and for some reason they watch them. maybe they'retaking an accounting class and it kind of helps them, but it's kind of fun to hear fromthose if somebody out there is watching it shoot me an email i'd love to hear from thosepeople, but it's a small world isn't it? well,

because of that we have to start having someinternational standards, because companies are becoming global with operations not injust the united states, but other countries as well. so, you might hear of something calledifrs that stands for international financial reporting standards, and they identify thepreferred accounting for companies ok. we won't get too much in this, but i want youto be aware of it that ifrs is more and more concerned each year with how are we goingto make the accounting operations in london comparable with the ones in georgia ok. howare we going to do that, we want to try to find a common set of rules, and that's whatifrs is. ok, i want you to read about next now were into a different subject, and i wantyou to read about this in your books. the

business entity forms and this is on pageeleven and twelve in your textbook. now, i'm not going to go through every aspect of this,but i want to hit some high points, it's on page eleven and twelve in your textbook. andwhat i want to do is, and i going to double-check that make sure i gave you the right pages.yes i did ok eleven and twelve in your textbook. now, if you start a business one of the firstthings that you have to decide is, how do i want to set up my business? and there'sthree main ways you can set up that business. you can set it up as a sole proprietorship,as a partnership, or as a corporation ok those are the three main ways. now there is kind-ofdifferent sub-ways under each one of those, but for the purposes of this class we're goingto kind-of concentrate just on those three

ways. now, there is a nice chart in your booki'm not going to talk about every little row and column on here, but i want you to readabout this and to know this. let's highlight a few of those ok proprietorship versus apartnership versus a corporation ok. now let's come off the slides for a second, and it'sjake right? let's say you started a landscaping business jake you can set it up as a soleproprietorship where you are the only owner, and you don't incorporate anything you'rejust a sole proprietorship, right? or what you can do is let's say there are two owners,and it's jake and matt let's say there were going to be two owners, and you're not goingto incorporate but you're going to be a partnership you can set it up that way, or the other thingyou can do is incorporate now going back to

the previous slide looking back at it realquick. you might think sole proprietorship means one owner, partnership just a few, andcorporation means a lot of owners that slide kind-of indicates that, but that's not totallytrue, because going back to you jake even if you were the only owner you could incorporatewhat it means to incorporate is you set your business up as a separate legal entity, aseparate legal entity if you're a corporation. not so much a contractor, but like sprintis a separate legal entity but even your landscaping business you can be a separate legal entityand set that up completely separate from you as a human you as a person. as a matter offact if you die the corporation is still alive, right? or if you're a partnership you canincorporate so i don't want you to think corporation

always mean hundreds of hundreds of owners,because there's actually a lot of corporations with just one or two owners. a corporationmeans you have gone through the paperwork, and fees, and procedures to set it up as aseparate legal entity, does that make sense? ok going back to this slide no matter howyou set up your business you're going to be a separate business entity which means you'regoing to keep your business books separate from your personal books. you don't want tocomingle those records ok. jake you don't want to keep track of your landscaping businessin the same check book and records as you do in your personal life, or if you have morethan one business you want to keep those separate as far as record keeping. but only a corporationis a separate legal entity ok. now the nice

thing about a corporation is that a corporationhas what is called limited liability. a proprietorship and a partnership have unlimited liability.unlimited liability is a bummer it's a bad thing for example, let's say jake that youhave a landscaping business, and you are set up as a sole proprietorship and let's saythat you have a lawn mowing incident and you run over somebody and they die, tragic, lawnmowing incident well since you have unlimited liability proprietorship they can come andsue you, and take your personal assets your home, your savings that grandma left you allthat sort of stuff. if you're a partnership, and you're not incorporated and let's sayjake has a tragic lawn mowing incident right? well let's say jake didn't have any money,but matts loaded they could actually come

and take your assets you have unlimited liabilitythat's a bummer isn't it? he did it and they're taking my assets, right? unlimited liabilityis a bummer. you want to have limited liability that's why you might incorporate what thatwould mean is this is if you incorporate, and that situation happens they can come tryto take the assets of the business, but they can't take your personal assets. it's kindof a shield sometimes we call it a corporate shield, does that make sense? that's why oneperson might incorporate or two people might incorporate ok, so, unlimited liability badthing, limited liability good thing. the process of getting to be a corporation? well to bein this framework to be if you want limited liability you have to incorporate in someway which means that there's certain policies

that you have to follow, paperwork that youhave to fill out, fees you have to pay to the government, maybe records you have toprovide to the government. sole proprietorship is easy you really don't have to do much youknow you'll just be a sole proprietorship ok. ok unlimited life a proprietorship a partnershipthey have a limited life that means if you die the business is over, but a corporationhas a unlimited life. if you are an owner, or a shareholder of sprint for example thinkabout that if you die is sprint going to be going on they probably won't send you a cardor flowers or anything, will they? they keep going a corporation has a unlimited life,is the business taxed? well that's a bummer about being a corporation a great about acorporation is that it has limited liability

the bummer is that a corporation is, let's explain this real quick let's say you are a sole proprietorship does that meanyou get to enjoy a tax free life, no. that just means that you get to fill out an informationaltax return and you pay your taxes at the personal level. same thing with a partnership the partnershipis not taxed, but a corporation is taxed. let me explain that in real elementary terms,sprint has a pile of money, then they have to pay taxes, and that pile of money is nowless right? then they pay dividends to their owners, or their shareholders do the individualshareholders and owners have to pay taxes again on those dividends. yes they do. that'scalled double taxation that's a bummer isn't it? it doesn't seem fair does it? corporationpays taxes, and then they distribute money

to their owners, and the owners have to paytaxes again that's the big bummer about being a corporation. do they have to pay like payrolltaxes? yes that's a great comment i'm not talking about payroll tax or sales tax i'mtalking about income tax ok? good question. is one owner allowed like i said yes you canhave a one owner corporation, proprietorship is just one owner, if you are a partnershipyou can't have one owner you have to have two or more. now, there is something calleda limited liability corporation an llc, have you ever heard of that? that's a great wayto start a business, because let's say the two of you start as a llc you would have theadvantages of limited liability that's good, and you also would not pay taxes at the businesslevel only at the personal level. the question

might be "why doesn't everybody be an llc,why doesn't sprint be an llc?" sprint would love to be an llc, but there are rules thatyou can only be such a certain size or less to be an llc once you have a certain amountof owners you have to incorporate basically. but if you were going to start a businessi would bet you that your lawyer would advise it to be an llc, but you'd have to talk tohim or her. i had a business i was an llc, because i wanted the limited liability, andi did not want to pay taxes at the business level cool. alright, we're going to talk abouta few more things that's really important. this is your new buddy the accounting equation,what is the accounting equation? the accounting equation is assets equal liabilities plusowners' equity ok. now i want you to remember

something here come off the slides real quick.when you first learn something you're going to have somebody like me who's going to teachyou something, and you're going to have to trust me a little bit right, like when i taughtmy son to play baseball when he was just a real little kid i told him how to hold a baseballbat right. now he doesn't know he's just got to trust me that that's the way you hold abaseball bat if i want to be mean i could show him so weird way now, he wouldn't knowwould he? now i'm not going to do that to you ok there are some things i'm going toteach you in chapter one, and throughout this whole course that you're not going to understandthe full implications of it, but i want you to memorize it. are you with me? trust me.and the implications will come into play as

the semester progresses, but going back tothe accounting equation for now i want you to memorize that the accounting equation isassets equals liabilities plus equity. are you with me? now, let's flesh that out a littlebit what are assets we've heard the term assets these are the resources you own or control,aren't they? such as, cash that's an asset that's a resource if you have vehicles, orsupplies, land, or equipment, or buildings, supplies those are assets right? those areassets that you own. a couple of these require a little more explanation such as accountsreceivable. jake let's go back to your business let's say you mow my lawn and you charge fiftydollars for a lawn mowing, and i just i'm going to pay you later i'll pay you next weekok and you say that's fine i trust you, you

would have a accountant receivable from methe customer, because you're going to receive cash in the future. does that make sense?that is an account receivable on your books ok. anybody here work at a bank by chance?no ok. well i have a car loan at bank of america they have a note receivable from dave kruga note is similar to a account receivable, but a note is little bit more formal. it'susually written down "hint notes receivable", and there usually interest involved, but anaccount receivable or a notes receivable is an asset. you're going to receive cash inthe future, does that make sense? it's usually dated have you ever had a loan, student loan,car loan, good for you keep living that way ok. when i did my car loan though for thoseof you who have car loans, or student loans

did you have to sign, and date a bunch ofstuff did they say an interest rate it was more formal than me just saying "hey you canjust pay me next week" you see what i'm saying we're not signing there's no interest that'san account receivable with a bank it's a note receivable, good question. alright what aboutliabilities, well unfortunately most of us know about liabilities, this debt this isthings we're going to have to pay in the future ok. going back to jake you have an accountreceivable for fifty dollars in your books from me well on my books i have an accountpayable to you right? that's a liability on my books. bank of america has a notes receivablefrom dave krug for the car loan, i have a note payable to bank of america ok. there'salso things like taxes payable going back

to the slide. taxes payable are taxes thati owe i'm going to have to payout cash for. wages payable or salaries payable anythingending in payable is i owe this person, company, or whatever i'm going to have to pay themin the future that's debt right. some of you have student loans payable. anybody here owna house, ok you have a mortgage payable right? so, those are liabilities ok. now, let's talkabout equity, what is equity? now most people understand what assets are, and most peopleunderstand what liabilities are generally speaking, but then they get to this equitything and they go "oh what's equity" we've heard about it before, but it's not quite,it's hard to get your arms around what equity is. i think the best way to learn about whatequity is, is to talk about equity increases,

and equity decreases but this is the owner'sinvestment in the company. so i want you to know this so as a matter of fact for you faceto facers we are going to have a quiz at the very beginning of the next period, and it'sgoing to be right at nine-o-clock so if you're late you'll miss it, but the quiz is goingto be number one what is the accounting equation, and that is assets equals liabilities plusowner's equity. the next question i'm going to ask you is how does owner's equity increase,and how does owner's equity decrease? so you folks at home even though you cannot takethis quiz i want you to act like it's a quiz, because i have found through teaching thisclass many times that this is a fundamental principle that i want to get into everyone'shead and i want to make everything easier

ok. so, know the accounting equation don'tjust abbreviate either assets equals liabilities plus owner's equity, and now let's talk abouthow owners' equity changes. how does owner's equity increase will there's two ways. thefirst way is investments of assets by the owner into the business, investments of assetsby the owner into the business. going back to jake and your business let's say that grandmadied and left you ten-thousand dollars in her will she gave it to you personally. andyou decide to take that ten-thousand dollars and you start your business with it well youare investing personal assets into the business that increase your owner's equity. let's sayyou own a truck and you decide to put into the business that's putting a different typeof asset into the business, and that increases

owner's equity. you with me so, putting assetsinto the business increases owner's equity. the second thing that increases owner's equityis revenue, what is revenue? you kind of know what revenue is right? when you said you weregoing to mow my lawn, and i'm going to give you fifty dollars later. that fifty dollarsis revenue, and you really don't have to wait until i pay you that's revenue as soon asyou're done mowing the lawn and will talk here in another lecture. if you go buy a twentydollar dvd at best buy after class today that's twenty dollars of revenue for best buy. ifyou pay fifteen dollars to get a haircut that's fifteen dollars of revenue to the barber correct,right? we'll talk about that we're going to kind-of ignore taxes for now, because thetaxes that really aren't that something you

have to give the government, but ignoringtaxes if you pay fifteen dollars for a haircut that's fifteen dollars of revenue for thebarber right? makes sense if you go buy a five dollar meal at mcdonalds that's fivedollars of revenue for mcdonalds. so, these are the two things that cause owner's equityto increase: investments of assets by the owner into the business, and revenue. now,i'm telling you right now face to facers this is the quiz this is the question these arethe answers. sometimes people will give me the answers that sound right, but there notsuch as they'll say "cash", well no cash doesn't always cause owner's equity to increase. ifi go get a fifty-thousand dollar loan in cash, but does that cause owner's equity increase?no. the questions and the answers to the quiz

are on this slide here the two things thatcause owner's equity increase investments of assets by the owner into the business,and revenue. it's just that simple i know you don't understand the full implicationsof this, but trust me and just memorize this for now. now, let's talk about two thingsabout how owners' equity decrease, and this is going to be the flip side of what we justdiscussed. if putting assets increasing taking assets out of the business decreases equitythat makes sense doesn't it? why might you take assets out of the business jake? welllet's say you need some money to pay your apartment rent or to buy groceries that'swhy you have a business right? so you can take money every now and support yourself.well that's fine that's expected when you

take those assets out of the business thatdecreases your owner's equity. make sense? that's expected that's normal assets increases,assets out decreases. marlin? how would that work for like a corporation like somebodytaking assets out. what that would be is how do assets leave a corporation and go to theowners through dividends primarily ok. so it's a little different when you think jakeslandscaping business versus sprint. but the principals still apply good question. alrightnow if revenues cause owners' equity to increase what do you think causes owner's equity todecrease? expenses you're exactly right you have salary expense you have advertising expenseyou have gasoline expense expenses cause owner's equity to decrease. so i told what's on thequiz didn't i? if you like find a chair for

your salon would that be an expense but onceit's in your salon it would be a revenue. no great question, and the there's a lot ofdifferent concepts wrapped in that question and it's a great question and i'm not goingto be able to fully answer it today, because it's going to involve some principles i'lltalk about the next couple lectures. first of all if you buy a huge asset we don't expenseit's an asset and that's not an expense now we'll depreciate over time we'll expense itslowly and that's when it causes owner's equity to decrease. and then there was second partof that question if forgot already oh does it become revenue? no. no revenue is whenyou provide product or services to customers and you can book that as revenue and you willeventually receive payment ok. the chair's

never going to pay you for anything it's nota customer does that make sense? great questions. so there's the whole quiz what's' the accountingequation assets equals liabilities plus owner's equity what causes owners' equity to increasegoing back to that slide investment of assets by the owner into the business and revenue.what causes owner's equity to decrease withdraws of assets by the owner out of the business,and expenses. would it still be a positive thing for equity if it was a non profit company?yes now i want you and it's a great question you're asking about not for profits and youasked about a corporation marlin. these are excellent questions; however, i'm not goingto fully be able to answer them it's kind of like baseball its like if i was teachingmy son how to play baseball and i would teach

him when you're on first base and they hitthe ball you run. if he's four or five years old i'm just trying to get the concepts thatrun this way around the bases run from first base to second base not first to third notto mom in the stands, but from first to second now for those of us who know baseball youknow that there's a lot of other implications right on a fly ball you go half way rightthere's a lot of different things but i'm not going try to teach my four or five yearold all those implications just yet. corporations not for profits they use these same principles,but in a slightly different way i don't want to go down that road just yet it will kindof confuse us. as a matter of fact the majority of our class financial accounting that youtake this semester is going to be in regards

to a sole proprietorship we'll talk a littlebit about corporations we'll talk a little bit about not for profit trust me these conceptsapply but it's a little different. so i think it will be easier to try think about jakeand his landscaping business as you learn these fundamental principle make sense? walkbefore you run. what i want to do right now is we have a few minutes and i want to doin your book and i'll do this often. is we'll work on something in class for a few minutes.for you folks at home there going to play this snazzy jazzy jccc music and i want youto do these problems as well and i want you to come back and go over the answers, andif it takes you more time folks at home just pause it, and play when we go over the answerswhen you're ready, but what i want to do is

go over quick study one-three in your bookthat's on page thirty one and exercise one-three ok let's just do those right now quick studyone-three on page thirty-one and exercise one-three on the bottom of page thirty two.i'll give you some time to do that for you folks here you can work together if you wantyou can share your answers, but i'll give you about four minutes and then will go throughthe answers. so let's do that right now. (music 44:20-48:15) ok i wanted to give you a littlebit more time face to facers, but were running out of time here so if you at home are notdone just pause it start it when you are done. but let's go through the answers real quicknow first of all notice in your text book there are quick studies, there are exercises,and further on there's problems. so when i

give you homework if i say to do quick studyone point two don't do exercise one point two don't do problem one point two do quickstudy so you can't just concentrate on the numbers you have to know if it's a quick studyan exercise or a problem. quick study one-three on the top of page thirty one external orinternal a lender is what external, what about the controller internal, shareholders areexternal, the sales staff is internal, the fbi and the irs are external, and so are consumergroups consumer groups are external, consumer groups are external, brokers like stock brokersexternal, suppliers are external, customers are external, the managers of a business internal,business press like the kansas city star or the kansas city business journal are external,and the district attorney is external, any

questions there? alright. let's jump overreal quick and go over exercise one-three what type of accounting is most involved?review of reports for sec compliance is mainly financial accounting, because it's for externalusers who might be considering in investing in the company or something like that. sonumber one is b financial accounting on exercise one-three on the bottom of page thirty-two.planning transactions to minimize taxes would be tax accounting ok we didn't talk aboutthat but there's tax accounting as well so number two is tax accounting. number threeinvestigating violations of tax laws is also tax accounting c. preparing external financialstatements what's that? b, financial accounting. what about budgeting? that's more of an internalthing right? so that would be managerial accounting

number five is a. number six cost accountingthat's more of an internal situation as well that's also internal that's also managerialaccounting so six is a. number seven external auditing is financial accounting like we discussedearlier so number seven is b. number eight is internal auditing that is managerial accountingso number eight is a, any questions on that? ok i know we went through that a little quicksorry about that. last thing i'm going to do is give you your homework please do thisfor next period you who've taken accounting know is the way you learn this stuff is bydoing it. so the only homework i'm giving you and once again keep track if this is aquick study or an exercise, and eventually well have problems, but i want you to do quickstudy one point eight, quick study one point

seven, and exercise one point seven. i knowthis was a little bit of a longer lecture, but i wanted to get some stuff in thanks alot and we'll see you next time bye-bye.