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

1-1 THE ACCOUNTING EQUATION page 8

1-1 Accounting Concept Business Entity –Financial information is recorded and reported separately from the owner’s personal financial information Unit of Measurement –Business transactions are stated in numbers that have common values – that is, using a common unit of measurement.

1-1 Classifications Accounts Receivable –ASSET Accounts Payable –LIABILITY Prepaid Insurance –ASSET Capital –OWNER’S EQUITY Cash –ASSET Supplies –ASSET

1-1 Classifications Accounts Receivable –ASSET Accounts Payable –LIABILITY Prepaid Insurance –ASSET Capital –OWNER’S EQUITY Cash –ASSET Supplies –ASSET

1-1 Owner’s Equity Capital – Increase –Cash deposits by owner –Assets donated by owner (ex: equipment) Withdraws – Decrease –Cash withdrawn for personal use by owner –Assets taken for personal use by owner Revenue – Increase –Sales –Income –Fees Expenses – Decrease –Rent –Utilities –Advertising

1-1 Accounting Concept Realization of Revenue –Revenue is Recorded at the time goods or services are sold

1-1 Sales Asset =Liabilities + Owner’s Equity CashAR – Oakdale School SuppliesPrepaid Insurance AP – Supply Depot Kim Park, Capital $3,225.00$5, August 12. Received cash from sales, $ Calculate the new balance 3, $5, , revenue

1-1 Sales on Account Asset =Liabilities + Owner’s Equity CashAR – Oakdale School SuppliesPrepaid Insurance AP – Supply Depot Kim Park, Capital $3,225.00$5, August 12. Sold services on account to Oakdale School, $ Calculate the new balance 3, $5, , revenue , $5, , revenue

1-1 Rent Asset =Liabilities + Owner’s Equity CashAR – Oakdale School SuppliesPrepaid Insurance AP – Supply Depot Kim Park, Capital $3,225.00$5, August 12. Paid cash for rent, $ Calculate the new balance 3, $5, , revenue , $5, , revenue , $5, , expense

1-1 Telephone Asset =Liabilities + Owner’s Equity CashAR – Oakdale School SuppliesPrepaid Insurance AP – Supply Depot Kim Park, Capital $3,225.00$5, August 12. Paid cash for telephone bill, $40.00 Calculate the new balance 3, $5, , revenue , $5, , revenue , $5, , expense , $5, , expense

1-1 Receipts Asset =Liabilities + Owner’s Equity CashAR – Oakdale School SuppliesPrepaid Insurance AP – Supply Depot Kim Park, Capital $3,225.00$5, August 12. Received cash on account from Oakdale School, $ Calculate the new balance 3, $5, , revenue , $5, , revenue , $5, , expense , $5, , expense , $5, ,200.00

1-1 Withdrawals

1-1 Withdrawals Asset =Liabilities + Owner’s Equity CashAR – Oakdale School SuppliesPrepaid Insurance AP – Supply Depot Kim Park, Capital $3,225.00$5, August 12. Paid cash to owner for personal use, $ Calculate the new balance 3, $5, , revenue , $5, , revenue , $5, , expense , $5, , expense , $5, , , $5, , withdrawal

1-1 Classifications Accounts Receivable –ASSET Sales –REVENUE Accounts Payable –LIABILITY Rent Expense –EXPENSE Prepaid Insurance –ASSET Drawing –OWNER’S EQUITY Utilities Expense –EXPENSE Cash –ASSET Capital –OWNER’S EQUITY Advertising Expense –EXPENSE Supplies –ASSET

1-1 Classifications Accounts Receivable –ASSET Sales –REVENUE Accounts Payable –LIABILITY Rent Expense –EXPENSE Prepaid Insurance –ASSET Drawing –OWNER’S EQUITY Utilities Expense –EXPENSE Cash –ASSET Capital –OWNER’S EQUITY Advertising Expense –EXPENSE Supplies –ASSET

1-1 Work Together 1-3 Workbook page 9 Textbook page 17

1-1 Asset =Liabilities + Owner’s Equity CashAR – Navarro Co. SuppliesPrepaid Insurance AP – Barrett Co. Vincent Orr, Capital Sales/revenue - Utility/expense - withdrawal/OE + Sales/revenue

1-1 Class Work On Your Own 1-3

1-1 Asset =Liabilities + Owner’s Equity CashAR – Navarro Co. SuppliesPrepaid Insurance AP – Barrett Co. Vincent Orr, Capital Sales/revenue - Rent/expense - withdrawal/OE + Sales/revenue

1-1 Stereo Asset =Liability +Owner’s Equity 1.Buy a stereo that costs $3, You have a down payment of $ You borrow the rest from the bank. $3,000.00$ $2,500.00

1-1 Homework Application 1-3

1-1 TERMS REVIEW revenue sale on account expense withdrawals page 17