New Asia Middle School www. nams. edu New Asia Middle School www.nams.edu.hk Target group: Secondary 1 students An Extended Learning Activity (A unit of work conducted in English to students who usually learn in Chinese) Assets, Liabilities and Capital e-learning platform: Accounting How transactions affect the accounting equation. Ex.1 & Ex.2 How transactions affect a company’s accounting equation.

Pre-lesson assignment Board Game – Budding Millionaire 4 players in the game: 1 banker and a bookkeeper 3 other players The objective is to make the most money. Who got the most money in your group? Who is the millionaire?

Objectives of the next 6 Basic Accounting lessons Students are able to identify how their daily transactions affect: their assets, liabilities and capital, and specifically the Cash Account the Furniture Account the Debtor Account. Loan Account. Capital Account.

Example 1: I bought a new bookshelf and paid $1,000 cash to the shop. Is the bookshelf an asset or a liability? an asset Is the cash an asset or a liability? an asset

Example 1: I bought a new bookshelf and paid $1,000 cash to the shop. Assets Bookshelf (+$1,000) Cash (–$1,000) The Furniture Account has increased by $1,000. The Cash Account has decreased by $1,000.

What do you mean by “furniture”? Furniture are objects such as: tables, chairs, sofas bookshelves and beds, which are put into a house, an office or a school to make it suitable for living in, or working or studying in.

Example 2: I paid $300 cash to a shop to buy a chair. Is the chair an asset or a liability? It is an asset.

Example 2: I paid $300 cash to a shop to buy a chair. Assets Chair (+$300) Cash (–$300) The Furniture Account has increased by $300. The Cash Account has decreased by $300.

Example 3: I bought a desk and paid $700 cash to the shop. Is the desk an asset or a liability? It is an asset. In which account do you include the desk? In the furniture account.

Example 3: I bought a desk and paid $700 cash to the shop. Assets Desk (+$700) Cash (–$700) The Furniture Account has increased by $700. The Cash Account has decreased by $700.

Example 4: You didn’t have any more money, so you borrowed money from your friend, Mary. You borrowed $2,000 cash from Mary. How much money did you have? I had $2,000. Is the loan from Mary an asset or a liability? It is a liability.

Example 4: You borrowed $2,000 cash from Mary. Assets Liabilities Cash (+$2,000) Loan from Mary(+$2,000) The Cash Account has increased by $2,000. The Loan from Mary Account has increased by $2,000.

Example 4a: You returned $500 cash to Mary. How much money did you return to Mary? I returned $500 to Mary. How much money do you still owe Mary? I still owe Mary $1,500. What is your liability now? My liability is $1,500.

Example 4a: You returned $500 cash to Mary. Assets Liabilities Cash (–$500) Loan from Mary(–$500) The Cash Account has decreased by $500. The Loan from Mary Account has decreased by $500.

Is the chair an asset or a liability? It is an asset. Example 4b: You had a chair that cost you $300 and you sold it to Mary for $500. She gave you $500 cash. Is the chair an asset or a liability? It is an asset.

Example 4b: You had a chair that cost you $300 and you sold it to Mary for $500. She gave you $500 cash. What was the cost of the chair at the very start? It cost $300. How much money did you receive from Mary? I received $500 from Mary. If the chair cost $300 and you received $500, then the difference is $200 ($500 – $300). So how much is your profit? The profit is $200.

Example 4b: You had a chair that cost you $300 and you sold it to Mary for $500. She gave you $500 cash. Assets Capital Chair (–$300) Profit (+$200) Cash (+$500) The Furniture Account has decreased by $300. The Capital Account has increased by $200. The Cash Account has increased by $500.

Example 4c: You had a chair that cost you $300 and you sold it to Mary for $500. You allowed her to pay after 2 weeks. When you allow someone to pay later, they are paying “on credit”.

Example 4c: You had a chair that cost you $300 and you sold it to Mary for $500. You allowed her to pay on credit after 2 weeks. Did Mary give you $500 when she got the chair? No, she did not. What did you allow Mary to do? I allowed Mary to pay on credit after 2 weeks. So who owed you $500? Mary owed me $500.

Example 4c: You had a chair that cost you $300 and you sold it to Mary for $500. You allowed her to pay on credit after 2 weeks. The person who owes you money is your debtor. So who was your debtor? Mary was my debtor. What do we say when we allow people to pay later? We say that they are paying on credit. What was your profit? My profit was $200.

Example 4c: You had a chair that cost you $300 and you sold it to Mary for $500. You allowed her to pay on credit after 2 weeks. Assets Capital Chair (–$300) Profit (+$200) Debtor: Mary (+$500) The Furniture Account has decreased by $300. The Capital Account has increased by $200. The Debtor: Mary Account has increased by $500.

Today, you have learnt how your daily transactions affect your assets, liabilities and capital. And you have learnt: How the transactions affect the Cash Account. How the transactions affect the Furniture Account. How the transactions affect the Debtor Account. How the transactions affect the Loan Account. How the transactions affect the Capital Account.