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2. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Financial Claims in Accounting Property and Financial Claims Section 3.1 The Accounting Equation Home Assets = Liabilities + Owner’s Equity A L OE

3. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Financial Claims in Accounting Property and Financial Claims Section 3.1 The Accounting Equation Home Assets = Liabilities + Owner’s Equity Property Financial Claims = A L OE

4. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Key Terms revenue expense withdrawal Transaction That Affect Revenue, Expense, and Withdrawals by the Owner Section 3.3 Home

5. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Revenue and Expense Transactions Section 3.3 Examples of Revenue Fees earned for services performed Cash received from the sale of merchandise revenue Income earned from the sale of goods or services. Transaction That Affect Revenue, Expense, and Withdrawals by the Owner Home

6. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Revenue and Expense Transactions Section 3.3 Examples of Expenses Rent Utilities Advertising expense The cost of products or services used to operate a business. Transaction That Affect Revenue, Expense, and Withdrawals by the Owner Home

7. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Withdrawals by the Owner Section 3.3 Withdrawals decrease Assets and Owner’s Equity. Investments increase Assets and Owner’s Equity. withdrawal When the owner takes cash or other assets from the business for personal use. Transaction That Affect Revenue, Expense, and Withdrawals by the Owner Home

8. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Question 1 O’Donnell’s Car Wash has the following assets and liabilities. Assets: Cash in Bank $9,500; Accounts Receivable $500; Computer Equipment $3,500; Car Wash Equipment $75,000; Building $450,000 Liabilities: Alto’s Equipment Service $2,500; First National Bank (mortgage on building) $200,000 What is the owner’s equity for O’Donnell’s? Step 1 Calculate total assets. $9,500 + $500 + $3,500 + $75,000 + $450,000 = $538,500 Step 2 Calculate total liabilities. $2,500 + $200,000 = $205,500 Step 3 Calculate owner’s equity. $538,500 - $202,500 = $336,000 Home A = L + OE

9. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Question 2 A business owner invests $12,000 cash in the business. How would you analyze this transaction? 1.Identify the accounts affected. a. Cash in Bank is affected. b. Owner’s Capital is affected. 2.Classify the accounts affected. a. Cash in Bank is an asset account. b. Owner’s Capital is an owner’s equity account. 3.Determine the amount of increase or decrease for each account affected. a.Cash in Bank is increased by $12,000. b.Owner’s Capital is increased by $12,000. 4.Make sure the accounting equation remains in balance. Home Assets = Liabilities + Owner’s Equity (+12,000) = 0 + (+$12,000)

10. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Effect of Transactions on the Accounting Equation Glencoe Accounting AssetsLiabilities Owner’s Equity Revenue++

11. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting AssetsLiabilities Owner’s Equity Revenue++ Expense OR - + ---- Effect of Transactions on the Accounting Equation

12. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting AssetsLiabilities Owner’s Equity Revenue++ Expense OR - + ---- Investment++ Effect of Transactions on the Accounting Equation

13. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting AssetsLiabilities Owner’s Equity Revenue++ Expense OR - + ---- Investment++ Withdrawal-- Effect of Transactions on the Accounting Equation

14. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting AssetsLiabilities Owner’s Equity Revenue++ Expense OR - + ---- Investment++ Withdrawal-- Effect of Transactions on the Accounting Equation What is the difference between revenue and investments by the owner?

15. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Problem 3-3 (page 66) Trans Assets=Liabilities+ Owners Equity Cash in Bank+Accts Rec+Comp Equip+Office Furn=Accts Pay+ Jan Swift, Capital Balance24,000 700 4,000 5,000 3,000 30,700 1 2 3 4 5 Balance

16. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting

17. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Copyright © by The McGraw-Hill Companies, Inc. All rights reserved. Any item of property has at least one financial claim against it. Accounts are used to analyze business transactions. Owner’s equity is changed by revenue, expenses, and withdrawals. Home

18. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Describe the relationship between property and financial claims List and define each part of the accounting equation. Learn how businesses use accounts. Demonstrate the effects of transactions on the accounting equation. Check the balance of the accounting equation after a business transaction has been analyzed and recorded. Glencoe AccountingCopyright © by The McGraw-Hill Companies, Inc. All rights reserved. Home

19. Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.Glencoe Accounting Home Assignment Connect – Problem 3-7 Chapter 3 Vocabulary Crossword/Matching