User Guide

Starting a Business
1–2 Simply Accounting
Amc1.doc, printed on 12/05/97, at 11:55 AM. Last saved on 12/05/97 10:05 AM.
Confidential ACCPAC International
National Construction
February 2, 1995
Things Owned: Claims Against Things Owned:
Cash in Bank $40,000 Jim Brown $50,000
Truck 10,000
Brown gets his first contract, but to complete it he needs to buy
another truck. It costs $12,000, and on February 3 he convinces
his banker to lend National Construction the money to buy it.
The loan is for a five-year term. National Construction now has
more trucks, but a new category is needed to describe the
bank's claim:
National Construction
February 3, 1995
Things Owned: Claims Against Things Owned:
Cash in Bank $40,000 Bank Loan $12,000
Trucks 22,000 Jim Brown 50,000
Everything the company owns was paid for with either the
bank's money or the money invested by the owner. Notice that
the value of the things owned equals the value of the claims
against things owned. This relationship is always true, and is
the basis for the entire accounting process:
Things Owned = Claims Against Things Owned
Let's look at another example. On February 4, National
Construction buys $1,000 worth of maintenance supplies for the
trucks and the supplier gives National 30 days to pay. Amounts
owed to a supplier who has given you credit are called accounts
payable.