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

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

3. = + 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.

4. = + 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.

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

6. © 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.

7. © 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.

8. © 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.

9. © 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.

10. © 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.

11. © 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.

12. © 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.

13. © 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.

14. © 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.

15. © 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.

16. © 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.

17. © 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.

18. © 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.

19. 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.