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Chapter 2: Starting a Proprietorship
Changes that Affect Owner’s Equity
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Encore is Ready to Open Chapter 2- Transactions occurring in daily operation Cash from sales, selling services on account, paying cash for rent, paying telephone bill, cash to owner for personal use Increase or decrease owner’s equity
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A Small Business p #1&2
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2.1- Transactions Change Owner’s Equity
Sale of goods or services increases owner’s equity An increase in OE resulting from business operations is called revenue Transaction 6: August 12. Received cash from sales, $ What accounts are affected? Cash (Assets) & Barbara T Capital (Owner’s Eq)
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2.1 Revenue Transactions, cont.
Sales on Account- sale for which cash is paid at a later date (charge sale) This is usually done along with contract- Encore allows daycare facility to pay at a later date Transaction 7: August 12. Sold services on account to Kids Time, $ On the balance sheet- these sales on account are called...Accounts Receivable- Kid’s Time (daycare fac) What other account is affected?
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2.1 Cash for Expenses Transactions to pay for goods and services needed for the business decrease Owner’s Eq Expense- decrease in Owner’s Eq due to business operations Transaction 8: August 12. Paid cash for rent, $ What accounts are affected by this transaction?? Transaction 9: August 12. Paid cash for telephone bill, $45.00.
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Examples of Expenses Advertising Equipment Rental and Repair
Charitable Contributions Other Miscellaneous
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2.1 Other Transactions Transaction 10: August 12. Received cash on account from Kids Time, $ Encore receives cash from a prior sale increases cash account AND decreases accounts receivable Withdrawals- assets taken out of business for owner’s personal use decreases Owner’s Eq- not a result of normal business practices Transaction 11: August 12. Paid cash to owner for personal use, $100.00
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2.1 On Your Own p. 29 Terms Review Audit Your Understanding #1-3
Work Together #4- wkbk On Your Own #5 -wkbk
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2.2 Balance Sheet A balance sheet may be prepared on any date to report information Assets, Liabilities & Owner’s Equity Balances have Changed in Chapter 2 for Encore so our Balance Sheet has to be revised Notice Totals are on the same line
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2.2 On Your Own p. 31 Audit Your Understanding #1-3
Work Together #4- in workbook On Your Own #5- in workbook
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Chapter Review pgs Application Problems
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