1. Property and Financial Claims
Property is anything of value that is owned or controlled.
Financial Claim is the legal right to an item or property.
Property Rights is the creditors’ and the owners’ financial
claims to property.
Credit is when you buy property and agree to pay for it later.
Creditor is a person or business that sells property on credit.
Property = Property Rights
Cost of Property = Financial Claims to Property

2. Financial Claims Example
If you buy a car for $12,000 and pay cash, then you have the financial claim on that car.
Property = Property Rights
Cost of Car = Your Claim to the Car
$12, = $12,000
Example b
If you buy a $12,000 car and put $4,000 down and borrow the $8,000 balance from the bank, then the financial claim on the car is shared between you and the bank.
Property = Property Rights
Cost of Car = Bank’s Claim Your Claim
$12, = $8, $4,000

3. Financial Claims in Accounting
Assets are property or items of value owned by a business.
Equity is the financial claims to assets.
Owner’s Equity is the owner’s financial claims to assets.
Liabilities are the creditor’s financial claims to assets.
Property = Property Rights
Cost of Asset = Creditor’s Claim Owner’s Claim
Assets
Liabilities
Owner’s Equity
Hey, that looks like it might be something important.

4. Basic Accounting Equation
Let’s look at that last part one more time.
Property = Property Rights
Cost of Asset = Creditor’s Claim Owner’s Claim
Assets
Liabilities
Owner’s Equity
I’m sure I’ll use that equation a lot.
Hey, that’s the
Basic Accounting Equation.
Assets
Liabilities
Owner’s Equity = +

5. Problem 3 – 1 Textbk: P. 49 & Wkbk: P. 28
Determine the missing dollar amount indicated by the question mark in each equation. Write each missing amount in your working papers.
10,000
26,000
3,000
26,000
6,000
13,000
Asi de Facil
That was easy
16,000
8,000
21,000
20,000
35,000
45,000

6. Homework Textbook Page: 65 & 66 Workbook Page: 37
Prob 3-4, Prob 3-5 & Prob 3-6

7. Business Transactions
A business transaction is an economic event that causes a change – either increase or decrease – in assets, liabilities, or owner’s equity.
An account shows the balance for a specific item.
Accounts Receivable is the amount of money owed to a business.
Accounts Payable is the amount of money a business owes to it’s creditors.

8. Basic List of Accounts
Maria Sanchez started a new business called Roadrunner Delivery Service.
Let’s take a look at the list of accounts for her business.
Assets = Liabilities Owner’s Equity
Cash in Bank
Accounts Receivable
Computer Equipment
Office Equipment
Delivery Equipment
Accounts Payable
M. Sanchez, Capital
Investments in the business.
Roadrunner
Delivery
Service
Note that assets are always listed in order of liquidity.
That means how quickly they can be converted to cash.

9. Effects of Transactions on the Accounting Equation
There are four basic steps to analyzing and recording business transactions.
1) Identify
2) Classify
3) Increase
or Decrease
4) Balance
1) Identify the accounts affected.
2) Classify the accounts affected.
3) Determine the amount of increase
or decrease for each account
affected.
4) Make sure the accounting equation
remains in balance.

10. Investments by the Owner
Business Transaction 1
Maria Sanchez took $25,000 from her personal savings and deposited that amount to open a business account in the name of Roadrunner Delivery Service.
1) Identify
2) Classify
3) Increase
or Decrease
4) Balance
Accounts affected are Cash in Bank and M. Sanchez, Capital
Cash in Bank is an asset account and M. Sanchez, Capital is an owner’s equity account
Cash in Bank is increased by $25,000 and M. Sanchez, Capital is increased by $25,000
The accounting equation is in balance
Assets = Liabilities Owner’s Equity
Cash
in Bank
M. Sanchez,
Capital
Trans 1
25,000 = +
25,000
Balance
25,000 = +
25,000

11. Additional Investments by the Owner
Business Transaction 2
The owner, Maria Sanchez, took two telephones valued at $200 each (total $400) from her home and transferred them to the business as Office Equipment.
1) Identify
2) Classify
3) Increase
or Decrease
4) Balance
Accounts affected are Office Equipment and M. Sanchez, Capital
Office Equipment is an asset account and M. Sanchez, Capital is an owner’s equity account
Office Equipment is increased by $400 and M. Sanchez, Capital is increased by $400
The accounting equation is in balance
Assets = Liabilities Owner’s Equity
Cash
in Bank
Office
Equipment
M. Sanchez,
Capital
Prev. Bal.
25,000 = +
25,000
Trans 2
400 = +
400
Balance
25,000 +
400 = +
25,400
25,400
25,400

12. Cash Payment Transactions
Business Transaction 3
Roadrunner issued a $3,000 check to purchase a computer system.
1) Identify
2) Classify
3) Increase
or Decrease
4) Balance
Accounts affected are Computer Equipment and Cash in Bank
Computer Equipment is an asset account and Cash in Bank is an asset account
Computer Equipment is increased by $3,000 and Cash in Bank is decreased by $3,000
The accounting equation is in balance
Assets = Liabilities Owner’s Equity
Cash
in Bank
Computer
Equipment
Office
Equipment
M. Sanchez,
Capital
Prev. Bal.
25,000
400 = +
25,400
Trans 3
(3,000)
3,000 =
Balance
22,000 +
3,000 +
400 = +
25,400
25,400
25,400

13. Homework
Textbook Page: 69
Workbook Page: 41
Problem 3-11

14. Summary of Transactions
Assets = Liabilities + Owner’s Equity
Cash
in Bank
Accounts
Receivable
Computer
Equipment
Office
Equipment
Delivery
Equipment
Accounts
Payable
M. Sanchez,
Capital
Trans , ,000
Balance , = ,000
Trans
Balance , = ,400
Trans (3,000) ,000
Balance , , = ,400

15. Buying on Credit Transactions
When a business buys an item on credit, that is referred to as on account.
Business Transaction 4
Roadrunner bought a used truck on account from North Shore Auto for $12,000.
1) Identify
2) Classify
3) Increase
or Decrease
4) Balance
Accounts affected are Delivery Equipment and Accounts Payable
Delivery Equipment is an asset account and Accounts Payable is a liability account
Delivery Equipment is increased by $12,000 and Accounts Payable is increased by $12,000
The accounting equation is in balance
Assets = Liabilities Owner’s Equity
Cash
in Bank
Computer
Equipment
Office
Equipment
Delivery
Equipment
Accounts
Payable
M. Sanchez,
Capital
Prev. Bal.
22,000
3,000
400 = +
25,400
Trans 4
12,000 =
12,000
Balance
22,000 +
3,000 +
400 +
12,000 =
12,000 +
25,400
37,400
37,400

16. Selling on Credit Transactions
Business can also sell items on account.
Business Transaction 5
Roadrunner sold one telephone to Green Company for $200 on account.
1) Identify
2) Classify
3) Increase
or Decrease
4) Balance
Accounts affected are Accounts Receivable and Office Equipment
Accounts Receivable is an asset account and Office Equipment is an asset account
Accounts Receivable is increased by $200 and Office Equipment is decreased by $200
The accounting equation is in balance
Assets = Liabilities + Owner’s Equity
Cash
in Bank
Accounts
Receivable
Computer
Equipment
Office
Equipment
Delivery
Equipment
Accounts
Payable
M. Sanchez,
Capital
Prev. Bal.
22,000
3,000
400
12,000 =
12,000 +
25,400
Trans 5
200
(200) =
Balance
22,000 +
200 +
3,000 +
200 +
12,000 =
12,000 +
25,400
37,400
37,400

17. Credit Payment Transactions
Business Transaction 6
Roadrunner issued a check for $350 in partial payment of the amount owed to its creditor, North Shore Auto.
1) Identify
2) Classify
3) Increase
or Decrease
4) Balance
Accounts affected are Cash in Bank and Accounts Payable
Cash in Bank is an asset account and Accounts Payable is a liability account
Cash in Bank is decreased by $350 and Accounts Payable is decreased by $350
The accounting equation is in balance
Assets = Liabilities + Owner’s Equity
Cash
in Bank
Accounts
Receivable
Computer
Equipment
Office
Equipment
Delivery
Equipment
Accounts
Payable
M. Sanchez,
Capital
Prev. Bal.
22,000
200
3,000
200
12,000 =
12,000 +
25,400
Trans 6
(350) =
(350)
Balance
21,650 +
200 +
3,000 +
200 +
12,000 =
11,650 +
25,400
37,050
37,050

18. Credit Receivable Transactions
Business Transaction 7
Roadrunner received and deposited a check for $200 from Green Company. The check received was full payment for the telephone sold on account in transaction 5.
1) Identify
2) Classify
3) Increase
or Decrease
4) Balance
Accounts affected are Cash in Bank and Accounts Receivable
Cash in Bank is an asset account and Accounts Receivable is an asset account
Cash in Bank is increased by $200 and Accounts Receivable is decreased by $200
The accounting equation is in balance
Assets = Liabilities + Owner’s Equity
Cash
in Bank
Accounts
Receivable
Computer
Equipment
Office
Equipment
Delivery
Equipment
Accounts
Payable
M. Sanchez,
Capital
Prev. Bal.
21,650
200
3,000
200
12,000 =
11,650 +
25,400
Trans 7
200
(200)
Balance
21,850 + +
3,000 +
200 +
12,000 =
11,650 +
25,400
37,050
37,050

19. Homework
Textbook Page: 56
Workbook Page: 28
Problem 3-2

20. Summary of Transactions
Assets = Liabilities + Owner’s Equity
Cash
in Bank
Accounts
Receivable
Computer
Equipment
Office
Equipment
Delivery
Equipment
Accounts
Payable
M. Sanchez,
Capital
Trans , ,000
Balance , = ,000
Trans
Balance , = ,400
Trans (3,000) ,000
Balance , , = ,400
Trans , ,000
Balance , , , = 12, ,400
Trans (200)
Balance , , , = 12, ,400
Trans (350) (350)
Balance , , , = 11, ,400
Trans (200)
Balance , , , = 11, ,400

21. Revenue Transactions
Income earned from the sale of goods and services is called revenue.
Revenue increases Owner’s Equity because it increases the assets of the business.
Business Transaction 8
Roadrunner received a check for $1,200 from a customer, Sims Corporation, for delivery services.
1) Identify
2) Classify
3) Increase
or Decrease
4) Balance
Accounts affected are Cash in Bank and M. Sanchez, Capital
Cash in Bank is an asset account and M. Sanchez, Capital is an owner’s equity account
Cash in Bank is increased by $1,200 and M. Sanchez, Capital is increased by $1,200
The accounting equation is in balance
Assets = Liabilities + Owner’s Equity
Cash
in Bank
Accounts
Receivable
Computer
Equipment
Office
Equipment
Delivery
Equipment
Accounts
Payable
M. Sanchez,
Capital
Prev. Bal.
21,850
3,000
200
12,000 =
11,650 +
25,400
Trans 8
1,200 =
1,200
Balance
23,050 + +
3,000 +
200 +
12,000 =
11,650 +
26,600
38,250
38,250

22. Expense Transactions
Money paid for goods and services used to operate a business is called expense.
Expenses decreases Owner’s Equity because they decrease the assets or increase the liabilities of the business.
Business Transaction 9
Roadrunner wrote a check for $700 to pay the rent for the month .
1) Identify
2) Classify
3) Increase
or Decrease
4) Balance
Accounts affected are Cash in Bank and M. Sanchez, Capital
Cash in Bank is an asset account and M. Sanchez, Capital is an owner’s equity account
Cash in Bank is decreased by $700 and M. Sanchez, Capital is decreased by $700
The accounting equation is in balance
Assets = Liabilities + Owner’s Equity
Cash
in Bank
Accounts
Receivable
Computer
Equipment
Office
Equipment
Delivery
Equipment
Accounts
Payable
M. Sanchez,
Capital
Prev. Bal.
23, 050
3,000
200
12,000 =
11,650 +
26,600
Trans 9
(700) =
(700)
Balance
22,350 + +
3,000 +
200 +
12,000 =
11,650 +
25,900
37,550
37,550

23. Withdrawal Transactions
Money taken out of a business for the owner’s personal use is called a withdrawal.
Withdrawals decreases Owner’s Equity because they decrease the assets of the business.
Business Transaction 10
Maria Sanchez withdrew $500 from the business for her personal use .
1) Identify
2) Classify
3) Increase
or Decrease
4) Balance
Accounts affected are Cash in Bank and M. Sanchez, Capital
Cash in Bank is an asset account and M. Sanchez, Capital is an owner’s equity account
Cash in Bank is decreased by $500 and M. Sanchez, Capital is decreased by $500
The accounting equation is in balance
Assets = Liabilities + Owner’s Equity
Cash
in Bank
Accounts
Receivable
Computer
Equipment
Office
Equipment
Delivery
Equipment
Accounts
Payable
M. Sanchez,
Capital
Prev. Bal.
22,350
3,000
200
12,000 =
11,650 +
25,900
Trans 10
(500) =
(500)
Balance
21,850 + +
3,000 +
200 +
12,000 =
11,650 +
25,400
37,050
37,050

24. Summary of Transactions
Assets = Liabilities + Owner’s Equity
Cash
in Bank
Accounts
Receivable
Computer
Equipment
Office
Equipment
Delivery
Equipment
Accounts
Payable
M. Sanchez,
Capital
Trans , ,000
Balance , = ,000
Trans
Balance , = ,400
Trans (3,000) ,000
Balance , , = ,400
Trans , ,000
Balance , , , = 12, ,400
Trans (200)
Balance , , , = 12, ,400
Trans (350) (350)
Balance , , , = 11, ,400
Trans (200)
Balance , , , = 11, ,400
Trans , ,200
Balance , , , = 11, ,600
Trans (700) (700)
Balance , , , = 11, ,900
Trans (500) (500)
Balance , , , = 11, ,400 =
Liabilities +
Owner’s Equity
Assets = +
11,650
25,400
37,050
37,050

25. Classwork
Textbook Page: 68
Workbook Page: 40
Problem 3-9

26. Classwork
Prob 3 - 9
Tktbk – P. 68
Wkbk – P. 40

27. Homework Textbook Page: 66 & 67 Workbook Page: 38 & 39
Problem 3-7 & Problem 3-8

28. Problem 3 – 3 Textbk: P. 60 & Wkbk: P. 29
Paid $50 for advertising in the local newspaper.
Received $1,000 as payment for preparing a report.
Wrote a $600 check for the month’s rent.
Jan Swift withdrew $800 for her personal use.
Received $200 on account from the person who had purchased the old office furniture.