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Chapter three

Chapter three. Accounting Equation. 3.1 The accounting elements. Assets Liabilities Owner’s Equity Revenue Expense Net Income(Net loss). New words and terms (3.1). Accounting equation proprietorship / proprietor future benefits unwritten promise owe to accounts payable

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Chapter three

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  1. Chapter three Accounting Equation

  2. 3.1 The accounting elements • Assets • Liabilities • Owner’s Equity • Revenue • Expense • Net Income(Net loss)

  3. New words and terms (3.1) • Accounting equation • proprietorship / proprietor • future benefits • unwritten promise • owe to • accounts payable • withdrawal

  4. New words and terms (3.1) • Sales revenue • service revenue • investment revenue • cost of goods sold • adminstrative expenses • selling expenses • financial expenses

  5. 3.2 The Accounting Equation • Basic: Assets= equities = liabilities+owner’s equity • Variations: owner’s equity=assets-liabilities liabilities= assets- owener’s equity

  6. 3.3 the effects of transactions on the accounting equation • Assets=Liabilities+Owner’s Equity • Revenues – Expenses= Net Income(loss)

  7. Transaction (1) : owner invested $ 50 000 cash in the business • Assets = liabilities + Owner’s Equity cash Ted Andy, Capital +50000 +50000

  8. Transaction (2) :purchased office equipment on account, $ 2 500 Assets = Liabilites + Owner’s Equity Cash+ office = Accounts + Ted Andy, Capital equipment payables 50000 = 50000 +2 500 = +2 500 52 500 = 52 500

  9. Transaction (3) :purchased office supplies for cash, $ 350 Assets = Liabilites + Owner’s Equity Cash+ office + office = Accounts + Ted Andy, Capital supplies equipment payables 50000 2 500 = 2500 50000 -350 +350 52 500 = 52 500

  10. Transaction (4) :paid amount owed to a creditor, $ 500 Assets = Liabilites + Owner’s Equity Cash+ office + office = Accounts + Ted Andy, Capital supplies equipment payables 49650 350 2 500 = 2500 50000 -500 -500 52 000 = 52 000

  11. Transaction (5) :purchased office supplies on account, $ 400 Assets = Liabilites + Owner’s Equity Cash+ office + office = Accounts + Ted Andy, Capital supplies equipment payables 49150 350 2 500 = 2000 50000 +400 = +400 52 400 = 52 400

  12. Transaction (6) :owner withdrew $ 300 for personal use Assets = Liabilites + Owner’s Equity Cash+office+office = Accounts + Ted’s– Ted ‘s+revenues-Expense supplies equipment payables Capital Drawing 49150 750 2 500 = 2400 50000 -300 = +300 52 100 = 52 100

  13. Transaction (7) :received cash as payment for professional fees, $ 3 500 Assets = Liabilites + Owner’s Equity Cash+office+office = Accounts + Ted’s– Ted ‘s+revenues-Expense supplies equipment payables Capital Drawing 48850 750 2 500 = 2400 50000 300 +3500 = +3500 55 600 = 55 600

  14. Transaction (8) :paid office rent $ 1 000 Assets = Liabilites + Owner’s Equity Cash+office+office = Accounts + Ted’s– Ted ‘s+revenues-Expense supplies equipment payables Capital Drawing 52350 750 2 500 = 2400 50000 300 3500 -1000 = +1000 54 600 = 54 600

  15. Transaction (9) : paid telephone expense, $ 75 Assets = Liabilites + Owner’s Equity Cash+office+office = Accounts + Ted’s– Ted ‘s+revenues-Expense supplies equipment payables Capital Drawing 51350 750 2 500 = 2400 50000 300 3500 1000 - 75 = +75 54 525 = 54 525

  16. New words and terms (3.2&3.3) • equity • accounting equation • offset • deposit • fiscal year • withdrawal • drawing

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