Chapter three Accounting Equation

3.1 The accounting elements Assets Liabilities Owner’s Equity Revenue Expense Net Income(Net loss)

New words and terms (3.1) Accounting equation proprietorship / proprietor future benefits unwritten promise owe to accounts payable withdrawal

New words and terms (3.1) Sales revenue service revenue investment revenue cost of goods sold adminstrative expenses selling expenses financial expenses

3.2 The Accounting Equation Basic: Assets= equities = liabilities+owner’s equity Variations: owner’s equity=assets-liabilities liabilities= assets- owener’s equity

3.3 the effects of transactions on the accounting equation Assets=Liabilities+Owner’s Equity Revenues – Expenses= Net Income(loss)

owner invested $ 50 000 cash in the business Transaction (1) : owner invested $ 50 000 cash in the business Assets = liabilities + Owner’s Equity cash Ted Andy, Capital +50000 +50000

Transaction (2) : purchased office equipment on account, $ 2 500 Assets = Liabilites + Owner’s Equity Cash+ office = Accounts + Ted Andy, Capital equipment payables 50000 = 50000 +2 500 = +2 500 52 500 = 52 500

Transaction (3) : purchased office supplies for cash, $ 350 Assets = Liabilites + Owner’s Equity Cash+ office + office = Accounts + Ted Andy, Capital supplies equipment payables 50000 2 500 = 2500 50000 -350 +350 52 500 = 52 500

Transaction (4) : paid amount owed to a creditor, $ 500 Assets = Liabilites + Owner’s Equity Cash+ office + office = Accounts + Ted Andy, Capital supplies equipment payables 49650 350 2 500 = 2500 50000 -500 -500 52 000 = 52 000

Transaction (5) : purchased office supplies on account, $ 400 Assets = Liabilites + Owner’s Equity Cash+ office + office = Accounts + Ted Andy, Capital supplies equipment payables 49150 350 2 500 = 2000 50000 +400 = +400 52 400 = 52 400

Transaction (6) : owner withdrew $ 300 for personal use Assets = Liabilites + Owner’s Equity Cash+office+office = Accounts + Ted’s– Ted ‘s+revenues-Expense supplies equipment payables Capital Drawing 49150 750 2 500 = 2400 50000 -300 = +300 52 100 = 52 100

Transaction (7) : received cash as payment for professional fees, $ 3 500 Assets = Liabilites + Owner’s Equity Cash+office+office = Accounts + Ted’s– Ted ‘s+revenues-Expense supplies equipment payables Capital Drawing 48850 750 2 500 = 2400 50000 300 +3500 = +3500 55 600 = 55 600

Transaction (8) : paid office rent $ 1 000 Assets = Liabilites + Owner’s Equity Cash+office+office = Accounts + Ted’s– Ted ‘s+revenues-Expense supplies equipment payables Capital Drawing 52350 750 2 500 = 2400 50000 300 3500 -1000 = +1000 54 600 = 54 600

Transaction (9) : paid telephone expense, $ 75 Assets = Liabilites + Owner’s Equity Cash+office+office = Accounts + Ted’s– Ted ‘s+revenues-Expense supplies equipment payables Capital Drawing 51350 750 2 500 = 2400 50000 300 3500 1000 - 75 = +75 54 525 = 54 525

New words and terms (3.2&3.3) equity accounting equation offset deposit fiscal year withdrawal drawing