1. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 1-2 How Business Activities Change the Accounting Equation Classifying accounts.

2. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Competency: Understanding the Accounting Cycle for a Service Business 2 LESSON 1-2 Objectives : 34 Describe the purpose of accounting and the role it plays in the global economy. 35 Demonstrate the effects of transactions on the accounting equation.

3. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Chapter 1 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 accounts in an accounting equation. 3 LESSON 1-2

4. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Transaction – a business activity that changes assets, liabilities, or owner’s equity. Account – a record summarizing all the information pertaining to a single item in the accounting equation. Account title – The name given to an account. Capital – The account used to summarize the owner’s equity in a business. 4 LESSON 1-2

5. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Types of Transactions Received Cash Investment from Owner Owner investing $ in his/her own business. Paid Cash for Supplies Business pays now (cash, check, debit/credit card) for supplies. Paid Cash for Insurance Business pays now (cash, check, debit/credit card) for Insurance. Bought Supplies on Account Purchasing supplies with the promise to pay later. Paid Cash on Account Paying today for a previously purchased item. 5 LESSON 1-2

6. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 1-2 RECEIVING CASH Transaction 1 August 1. Received cash from owner as an investment, $5,000.00. page 10

7. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON 1-2 PAYING CASH Transaction 2 August 3. Paid cash for supplies, $275.00. Transaction 3 August 4. Paid cash for insurance, $1,200.00. page 11

8. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 1-2 TRANSACTIONS ON ACCOUNT Transaction 4 August 7. Bought supplies on account from Supply Depot, $500.00. Transaction 5 August 11. Paid cash on account to Supply Depot, $300.00. page 12

9. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 1-2 DEFINE TERMS REVIEW transaction account account title account balance capital page 13 In your Chapter 1Terms Word Document and resave!

10. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Exit Ticket for Chapter 1-2 1.What must be done if a transaction increases the left side of the accounting equation? 2.How can a transaction affect only one side of the accounting equation? 3.To what does the phrase on account refer? 10 LESSON 1-2 In a Word Document, SaveAS: Chapter1-2AYUYourName Drop a copy in my InBox today before you leave!

11. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Chapter 1-2 Assignments Complete on Aplia Work Together 1-2 On Your Own 1-2 Application Problem 1-2 11 LESSON 1-2