1. LESSON 1-2 How Business Activities Change the Accounting Equation
3/31/2017
LESSON 1-2
How Business Activities Change the Accounting Equation
Objectives
 Define accounting terms related to starting a service business organized as a proprietorship and to changes that affect the accounting equation.
Identify accounting concepts and practices related to starting a service business organized as a proprietorship and to changes that affect the accounting equation.
Classify accounts as assets, liabilities, or owner’s equity and demonstrate their relationships in the accounting equation.
 Analyze how transactions affect the accounts in an accounting equation.

2. What we will be covering
 Explain and demonstrate receiving cash, page 10.
 Explain and demonstrate paying cash, page 11.
 Explain and demonstrate transactions on account, page 12.
LESSON 1-2

3. RECEIVING CASH
page 10
Transaction 1 August 1. Received cash from owner as an investment, $5, (START UP INVESTMENT)
LESSON 1-2

4. PAYING CASH
page 11
Transaction 2 August 3. Paid cash for supplies, $ (Building inventory)..
Transaction 3 August 4. Paid cash for insurance, $1,
LESSON 1-2

5. TRANSACTIONS ON ACCOUNT
page 12
Transaction 4 August 7. Bought supplies on account from Supply Depot, $
Transaction 5 August 11. Paid cash on account to Supply Depot, $
LESSON 1-2

6. Working Together 1-2 P.13 + + + + +, - - -
Determining how transactions change an accounting equation
Write the answers to the following transactions in the working papers.
For each transaction, place a plus (+) in the appropriate column if the classification is increased. Place a minus (-) in the appropriate column if the classification is decreased
Bought supplies on account
Received cash from owner as an investment.
Paid cash for insurance
Paid cash on account
Trans.
No.
Assets = Liabilities Owner’s Equity 1. 2. 3. 4. + + + +
+, - - -

7. On your own 1-2 P.13 + + + + +, - +, - - -
Determining how transactions change an accounting equation
Write the answers to the following transactions in the working papers.
For each transaction, place a plus (+) in the appropriate column if the classification is increased. Place a minus (-) in the appropriate column if the classification is decreased
Received cash from owner as investment
Bought supplies on account
Paid cash for supplies
Paid cash for insurance
Paid cash on account
Trans.
No.
Assets = Liabilities Owner’s Equity 1. 2. 3. 4. 5. + + + +
+, -
+, - - -
LESSON 1-2

8. ASSIGNMENT: Application Problem 1-2 p.19-20
When done, hand in. Plus Part Three of study guide p.3
Determining how transactions change an accounting equation.
TERMS REVIEW
transaction
account
account title
account balance
capital
LESSON 1-2

9. 1-2 APPLICATION PROBLEM Trans. No.
LESSON 1-2
3/31/2017
1-2 APPLICATION PROBLEM
Trans.
No.
Assets = Liabilities Owner’s Equity
Accts. Pay Accts Pay Calvin
Five Star Riverland Parrish
Cash Supplies +Insurance = Supply Co Capital
Beg. Bal 1. 2. 3. 4. 5. 6. 7. 8.
New Bal.
+3,000
+3,000
3,000
3,000
-1,600
+1,600
1,400
1,600
3,000
+700
+700
700
1,600
1,400
700
3,000
+300
+300
1,400
1,000
1,600
700
300
3,000
-700
-700
700
1,000
1,600
300
3000
-200
-200
500
1,000
1,600
100
3,000
-100
+100
400
1,100
1,600
100
3,000
+1,500
+1,500
1,900
1,100
1,600
100
4,500