= + The Accounting Equation Liabilities Equity Assets Describe what an organization has invested in. (LO7) © 2013 McGraw-Hill Ryerson Limited.

= + The Accounting Equation Liabilities Equity Assets Describe what an organization has invested in. Describe non-owner financing (borrowing) (LO7) © 2013 McGraw-Hill Ryerson Limited.

= + The Accounting Equation Liabilities Equity Assets Describe what an organization has invested in. Describe non-owner financing (borrowing). Describe owner financing . (LO7) © 2013 McGraw-Hill Ryerson Limited.

= + The Accounting Equation Liabilities Equity Assets = + The accounting equation is used to keep track of changes in a company’s assets, liabilities, and equity. (LO7) © 2013 McGraw-Hill Ryerson Limited.

= + The Accounting Equation Liabilities Equity Assets = + Business transactions cause changes in assets, liabilities, and equity. (LO7) © 2013 McGraw-Hill Ryerson Limited.

© 2013 McGraw-Hill Ryerson Limited. Transaction Analysis We need to determine: Which accounts are being affected. If the accounts are increasing or decreasing. (LO7) © 2013 McGraw-Hill Ryerson Limited.

© 2013 McGraw-Hill Ryerson Limited. Transaction Analysis (1) Virgil Klimb invests $10,000 cash in the business. Analysis: Cash increases by $10,000. Owner’s capital increases by $10,000. (LO7) © 2013 McGraw-Hill Ryerson Limited.

© 2013 McGraw-Hill Ryerson Limited. Transaction Analysis (2) Purchased supplies for $2,500 cash. Analysis: Supplies increase by $2,500. Cash decreases by $2,500. (LO7) © 2013 McGraw-Hill Ryerson Limited.

© 2013 McGraw-Hill Ryerson Limited. Transaction Analysis (3a) Purchased $1,100 of supplies on credit. Analysis: Supplies increase by $1,100. Accounts Payable increases by $1,100 (LO7) © 2013 McGraw-Hill Ryerson Limited.

© 2013 McGraw-Hill Ryerson Limited. Transaction Analysis (3b) Purchased $6,000 of equipment on credit. A promissory note was signed. Analysis: Equipment increases by $6,000. Notes payable increases by $6,000. (LO7) © 2013 McGraw-Hill Ryerson Limited.

© 2013 McGraw-Hill Ryerson Limited. Transaction Analysis (4) Services rendered for $2,200 cash. Analysis: Cash increases $2,200 Owner’s equity increases $2,200 (LO7) © 2013 McGraw-Hill Ryerson Limited.

© 2013 McGraw-Hill Ryerson Limited. Transaction Analysis (5) Payment of $1,000 rent expense in cash. Analysis: Cash decreases $1,000 Owner’s equity decreases $1,000 (LO7) © 2013 McGraw-Hill Ryerson Limited.

© 2013 McGraw-Hill Ryerson Limited. Transaction Analysis (6) Payment of $700 salaries expense in cash. Analysis: Cash decreases $700 Owner’s equity decreases $700 (LO7) © 2013 McGraw-Hill Ryerson Limited.

© 2013 McGraw-Hill Ryerson Limited. Transaction Analysis (7) Service contract signed for April. Analysis: No economic exchange has taken place All accounts remain unaffected (LO7) © 2013 McGraw-Hill Ryerson Limited.

© 2013 McGraw-Hill Ryerson Limited. Transaction Analysis (8)Services and rental revenues of $1,900 rendered for credit. ($1,600 Teaching Revenue and $300 Equipment Rental Revenue) Analysis: Accounts receivable increases $1,900 Owner’s equity increases $1,900 (LO7) © 2013 McGraw-Hill Ryerson Limited.

© 2013 McGraw-Hill Ryerson Limited. Transaction Analysis (9) Receipt of $1,900 cash on account. Analysis: Cash increases $1,900 Accounts receivable decreases $1,900 (LO7) © 2013 McGraw-Hill Ryerson Limited.

© 2013 McGraw-Hill Ryerson Limited. Transaction Analysis (10) Payment of $900 accounts payable. Analysis: Cash decreases $900 Accounts payable decreases $900 (LO7) © 2013 McGraw-Hill Ryerson Limited.

© 2013 McGraw-Hill Ryerson Limited. Transaction Analysis (11) Withdrawal of $600 cash by owner. Analysis: Cash decreases $600 Owner’s capital decreases $600 (LO7) © 2013 McGraw-Hill Ryerson Limited.

Financial Statement Preparation The final balances of the accounts after all of the transactions have been recorded are as follows: This information will be used to prepare the financial statements. (LO7) © 2013 McGraw-Hill Ryerson Limited.