Contents
  
 
 
Learning Goal 3: Define and Identify the Two Claims
on Assets
   47
Overview    47
The Owner’s Claim and the Creditors'
Claims    48
Owner's Equity and Creditors' Equity
Defined    48
Why the Two Claims Exist    49
Compare the Claims    50
Management of a Business Changes the
Owner's Equity    53
Review and Vocabulary 53
Practice    54


Learning Goal 4: Use the Accounting Equation
to Show the Condition
   56
Overview    56
The Financial Condition of a Business    57
The Accounting Equation    57
Visualizing the Condition    59
Practice    60

Learning Goal 5: Define “Entity” and Identify
Different Types
   62
Overview    62
Economic Entities    63
The Economic Entity Explained    63
The Economic Entity Assumption    64
How to Identify an Economic Entity    64
How Businesses Are Owned    67
Classification by Ownership    67
The Proprietorship    67
The Partnership    69
The Corporation    70
The Same Basic Principles for All
Business Types    71
Review and Vocabulary    73
Practice
   74
 
   
Learning Goal 1: Explain What a Business Is
and What It Does 3
 
Welcome    3
Identify a Business    4
Business Characteristics    4
The Two Kinds of Resources    5
Classifying a Business    5
Business Operations    6
What Is Wealth?    6
How a Business Accumulates Wealth    8
How a Business Creates a New Resource    9
How Much Value Is Created?    10
Confirming the Value Created    14
Success or Failure?    16
Review and Vocabulary    18
Practice 19
Story: The Wealth of Darius—Part I     23

 
Learning Goal 2: Define and Identify Assets    33
 
Overview    33
A Review of Resources    34
Resources in a Business    34
The Dual Nature of Property    35
Property as Resource and Wealth    35
The Two Essential Characteristics of Assets    36
Overview    36
Assets: The Everyday Meaning and the
Business Meaning    36
The “Future Benefit” Characteristic    38
Examples of Future Benefits (Service Potential)    39
The “Owned by the Business as a Result of a Past
Event” Characteristic    40
More Examples of Assets and Their Characteristics    41
Review and Vocabulary    42
Practice    43
 
   
 
    
  
 
   
   
ix