How Transactions Change Owner’s Equity in an Accounting Equation

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Presentation transcript:

How Transactions Change Owner’s Equity in an Accounting Equation Section 1-3

Terms Revenue (Sales)- Sale on Account (Asset)- An increase in owner’s equity/capital resulting from the operation of a business (making a sale). Sale on Account (Asset)- A sale for which cash will be received at a later date. (Accounts Receivable) The customer takes the product and does not give you cash!

Terms Continued Expense- A decrease in owner’s equity resulting from the operation of a business. Advertising Utilities Insurance Miscellaneous Supplies

Terms Continued Withdrawals- Assets taken out of a business for the owner’s personal use. (The owner pays himself/herself (paycheck)) CASH (The owner removes product from the store to keep) INVENTORY

Received cash from Sales, $295.00 Examples of Transactions Affecting the Accounting Equation and Accounts Affected Received cash from Sales, $295.00 Cash (+ Left) Capital (+ Right) Pg. 14

Transaction 7 Sold Services on Account, $350.00 Accounts Receivable (+Left) Capital (+ Right) Pg. 14

Transactions 8 & 9 Paid Cash for Goods/Services (Rent, $300.00, Phone, $40.00) Cash (- Left) Capital (- Right) Pg. 15

Transaction 10 Received cash on account from Oakdale School, $200.00 Cash + Left Accounts Receivable – Left Pg. 16

Transaction 11 Paid Cash to owner for personal use, $125.00 Cash – Left Capital – Right Pg. 16

Working Together & On Your Own Textbook Pg. 17 Workbook Pgs. 9 & 10