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Understanding Sales and Equity in Business Transactions

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Learn about sales impact on owner’s equity, payment options, transactions in proprietorships, revenue realization, expenses, and equity changes.

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Understanding Sales and Equity in Business Transactions

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  1. Lesson 1-3 Do Now: LO6 • Today you will learn about sales and its effect on Owner’s Equity • Write down different payment options you have when making a purchase • What is a transaction is and what are different transactions a typical proprietorship may engage i? • Take out homework for review

  2. Lesson 1-3 Transactions Affecting Owner’s Equity LO6 • An increase in equity resulting from the sale of goods or services is called revenue. • When cash is received from a sale, total amount of both assets and owner’s equity is increased • A sale for which payment will be received at a later date is called a sale on account. • Realization of Revenue: revenue recorded at time goods or services are sold as opposed to when payment is made

  3. Lesson 1-3 Transactions Affecting Owner’s Equity LO6 Transaction 6January 10. Received cash from sales, $1,100.00. Transaction 7January 12. Sold services on account to Main Street Services, $500.00.

  4. Lesson 1-3 Transactions Affecting Owner’s Equity LO6 Total of left side: $1,935 + $500 + $385 + $900 = $3,720 Total of right side: $120 + $3,600 = $3,720

  5. Lesson 1-3 Expense Transactions LO7 • Unlike a liability, which is an amount that is owed, the cost of goods or services used to operate a business is called an expense. • Telephone, internet, rent, advertising, and utilities are common

  6. Lesson 1-3 Expense Transactions LO7 Transaction 8January 12. Paid cash for communications bill for cell phone and Internet service, $80.00.

  7. Lesson 1-3 Expense Transactions LO7 Transaction 9January 13. Paid cash for equipment rental, $400.00.

  8. Lesson 1-3 Other Cash Transactions • Assets taken from the business for the owner’s personal use are called withdrawals. • Decreases owner’s equity

  9. Lesson 1-3 Other Cash Transactions Transaction 10January 16. Received cash on account from Main Street Services, $200.00. Transaction 11January 16. Michael Delgado withdrew equity in the form of cash, $350.00.

  10. Lesson 1-3 Summary of Changes in Owner’s Equity

  11. Lesson 1-3 Lesson 1-3 Audit Your Understanding 1. How is owner’s equity affected when cash is received from sales? ANSWER • Owner’s equity is increased.

  12. Lesson 1-3 Lesson 1-3 Audit Your Understanding 2. How is owner’s equity affected when services are sold on account? ANSWER • Owner’s equity is increased.

  13. Lesson 1-3 Lesson 1-3 Audit Your Understanding 3. How is owner’s equity affected when cash is paid for expenses? ANSWER • Owner’s equity is decreased.

  14. Class Work • 1-3 Work Together • Individual Work: complete 1-3 OYO • Reciprocal Teaching: approach board to demonstrate completion Application Problem 1-3 & Application Problem 1-4 (text pages 25, 26, & 27) at front of room

  15. Review Game: • Chapter 1 terms review game using SuperTeacher tools chapter 1 speed review game • Break up into 2 teams, with bells • Team that wins receives 2 extra credit points on test • Then begin Mastery Problem

  16. Homework • Finish Chapter 1 Mastery Problem • Complete Chapter 1 Challenge Problem • Complete Chapter 1 Crossword Puzzle • Closure: How else can one record transactions besides using the accounting equation?

  17. Fist of Five • How comfortable are you with chapter 1 material? • No idea • Somewhat understand • Comfortable • Can test well with the information • Can teach to peers

  18. Do Now: • Take out crossword puzzle, mastery problem and challenge problem and compare answers with classmates around you • Parking Lot: Write Down any questions you have regarding Chapter 1 • If you do not have any questions but, rather, answers, please answer the questions on the front board for your fellow classmates • Individually: draw a diagram of containing types of transactions that increase Owner’s Equity and types that decrease Owner’s Equity

  19. Closure: • Cross-Curricular Connections: Are there different types of spending you have? If so, what are they?

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