1. Chapter 5 – The Expanded Owner’s Equity

2. 5.1 Define Key terminology:
Revenue, Expenses, Drawings
Revenue Recognition Principle (Accounting Principles) accrual basis of accounting
 Read 5.1 and answer review questions #1,2, 6, 9,10,11, 12, 18, p. 140 (t), p. 78 (w)
Assets =
Liabilities +
Owner’s Equity - - + +
Debit (DR)
Credit (CR)
Debit
Credit

3. + + + + Owner’s Equity Drawings Capital Owner withdrawal
Owner investment
Debit
Credit
Expenses
Revenue + +
$ earned from providing service or good
Cost of operating business
Credit
Debit

4. 5.2 The Income Statement
(Record definition on back of handout) is a financial statement that summarizes the items of revenue & expenses to show a net income or net loss of a business for a given period of time (like a video)

5. Heading Heading Heading Net Income/ Net Loss 1 2 3
All revenue accounts (alpha)
Heading 4
All expenses accounts (alpha) 5 6
Net Income/ Net Loss

6. Time Period Concept (p.148)
Accounting takes place over specific periods of time know as fiscal period (equal length when measuring financial progress, eg. 1 year)

7. Matching Principal (p.149)
Each expense must be recorded in the same period as the revenue it helped earn in order to fairly calculate net income/ loss.

8. Chart of Accounts p. 139
Is a list of ledger accounts and their numbers arranged in ledger order (A, L OE  Capital, drawings, Revenue, Expense)

9. 300’s
100’s Liquidity
400’s
500’s
200’s

10. Try these Exercises!!
Read 5.1 & answer review questions #1,2,6,9,10,11,18 p. 140 (t), p. 78 (w)
Ex. #1, 2, 3 p (t), p (w)