1 / 13

LESSON 1-2

LESSON 1-2. How Business Activities Change the Accounting Equation. Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School. Business activities change the amounts in the accounting equation.

gladysturner
Télécharger la présentation

LESSON 1-2

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. LESSON 1-2 How Business Activities Change the Accounting Equation Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School

  2. Business activities change the amounts in the accounting equation. Transaction – a business activity that changes assets, liabilities, or owner’s equity Unit of Measurement – business transactions are stated in numbers that have common values What are Business Activities? LESSON 1-2

  3. ASSETS Cash Supplies Accounts Receivable Prepaid Insurance Buildings Equipment LIABILITIES Accounts Payable (A/P) Mortgage Payable Notes Payable (N/P) OWNER’S EQUITY (O/E) Capital REVIEW OF TYPES OF ACCOUNTS LESSON 1-2

  4. About Accounts • Account – a record summarizing all the information pertaining to a single item in the accounting equation • Account Title – the name given to an account • Account Balance – the amount in an account • Capital – the account used to summarize the owner’s equity in a business LESSON 1-2

  5. The Accounting Equation You must always keep the accounting equation in balance. • ASSETS = LIABILITIES + OWNERS EQUITY LESSON 1-2

  6. RECEIVING CASH FROM THE OWNER Analyze the transaction: What accounts will the transaction affect? • We are receiving cash which is an asset. It is increasing. • The owner is investing in the business so they are increasing their equity (owners equity) in the business. LESSON 1-2

  7. Transaction 1August 1. Received cash from owner as an investment, $5,000.00. RECEIVING CASH page 10 LESSON 1-2

  8. PAYING CASH FOR SUPPLIES Analyze the transaction: What accounts will the transaction affect? • We are paying cash which is an asset. It is decreasing. • We are buying supplies which are assets. Our supplies are increasing. LESSON 1-2

  9. Transaction 2August 3. Paid cash for supplies, $275.00. PAYING CASH page 11 Transaction 3August 4. Paid cash for insurance, $1,200.00. LESSON 1-2

  10. LIABILITY ACCOUNT: ACCOUNTS PAYABLE • It is a common business practice to buy items and pay for them at a future date. • Another way to state this activity is to say that these items are bought onaccount. • Since we now owe money to a vendor we have incurred a liability we call Accounts Payable. • When we pay the vendor we will be decreasing the amount of money we owe and our liability will decrease. LESSON 1-2

  11. Transaction 4 August 7. Bought supplies on account from Supply Depot, $500.00. TRANSACTIONS ON ACCOUNT page 12 Transaction 5 August 11. Paid cash on account to Supply Depot, $300.00. LESSON 1-2

  12. TRANSACTIONS ON ACCOUNT Analyze the transaction: What accounts will the transaction affect? • We are buying supplies which is an asset. It is increasing. • We now owe money (A/P) to our supply vendor which is a liability. Our accounts payable is increasing. LESSON 1-2

  13. TERMS REVIEW page 13 • transaction • account • account title • account balance • capital LESSON 1-2

More Related