How Business Activities Change the Accounting Equation Section 1-2

Transaction Business activities that change the assets, liabilities, and/or owner’s equity

Account A record summarizing all the information pertaining to a single item in the accounting equation An account title is given to each item Examples: Cash, Supplies, Prepaid Insurance, Accounts Payable, Capital

Account Balance The amount in the account Each account has its own balance

Trans. 1: Received Cash Investment From Owner Assets = Liabilities + Owner’s Equity Cash +100 = Capital +100

Trans. 2: Paid Cash for Supplies Assets = Liabilities + Owner’s Equity Cash -50 Supplies +50

Trans. 3: Paid Cash for Insurance Assets = Liabilities + Owner’s Equity Cash -500 Prepaid Ins. +500

Trans. 4: Bought Supplies on Account Assets = Liabilities + Owner’s Equity