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LESSON 1-2

LESSON 1-2. How Business Activities Change the Accounting Equation. Objectives  Define accounting terms related to starting a service business organized as a proprietorship and to changes that affect the accounting equation.

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LESSON 1-2

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  1. LESSON 1-2 How Business Activities Change the Accounting Equation 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 the accounts in an accounting equation.

  2. What we will be covering Explain and demonstrate receiving cash, page 10.  Explain and demonstrate paying cash, page 11.  Explain and demonstrate transactions on account, page 12. LESSON 1-2

  3. Transaction 1August 1. Received cash from owner as an investment, $5,000.00. (START UP INVESTMENT) RECEIVING CASH page 10 LESSON 1-2

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

  5. 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

  6. Working Together 1-2 P.13 Determining how transactions change an accounting equation Write the answers to the following transactions in the working papers. For each transaction, place a plus (+) in the appropriate column if the classification is increased. Place a minus (-) in the appropriate column if the classification is decreased • Bought supplies on account • Received cash from owner as an investment. • Paid cash for insurance • Paid cash on account + + + + +, - - -

  7. On your own 1-2 P.13 Determining how transactions change an accounting equation Write the answers to the following transactions in the working papers. For each transaction, place a plus (+) in the appropriate column if the classification is increased. Place a minus (-) in the appropriate column if the classification is decreased • Received cash from owner as investment • Bought supplies on account • Paid cash for supplies • Paid cash for insurance • Paid cash on account + + + + +, - +, - - - LESSON 1-2

  8. TERMS REVIEW ASSIGNMENT:Application Problem 1-2 p.19-20 When done, hand in. Plus Part Three of study guide p.3 Determining how transactions change an accounting equation. • transaction • account • account title • account balance • capital LESSON 1-2

  9. 1-2 APPLICATION PROBLEM +3,000 +3,000 3,000 0 0 0 0 3,000 -1,600 +1,600 1,400 1,600 0 0 3,000 0 +700 +700 1,600 0 700 1,400 700 3,000 +300 +300 1,400 1,000 1,600 700 300 3,000 -700 -700 700 1,600 0 300 3000 1,000 -200 -200 1,000 1,600 0 100 3,000 500 -100 +100 400 1,100 1,600 0 100 3,000 +1,500 +1,500 1,900 1,100 1,600 0 100 4,500

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