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Accounting I

Accounting I. Chapter 2, Section 1: How Transactions Change Owner’s Equity . Revenue Transactions. A transaction for the sale of goods or services results in an increase in owner’s equity An increase in owner’s equity resulting from the operation of the business is called revenue.

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Accounting I

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  1. Accounting I Chapter 2, Section 1: How Transactions Change Owner’s Equity

  2. Revenue Transactions • A transaction for the sale of goods or services results in an increase in owner’s equity • An increase in owner’s equity resulting from the operation of the business is called revenue

  3. Sale of Services for Cash Transaction 1: Received cash from sales, 425. T19.

  4. Sale of Services for Cash Transaction 1: Received cash from sales, 425. T19.

  5. Sales On Account • Just as a business or individual may make purchaseson account, buying goods and services using credit and paying at a later date, a business may also sell goods or services on account accepting payment at a later date.

  6. Sales on Account • A sale for which cash will be received at a later date is called a saleonaccount • Accounting Concept Realization of Revenue states: Revenue is recorded at the time of the sale, regardless of when payment is made

  7. Accounts Receivable • A business or individual to whom a sale on account is made is called an AccountsReceivableaccount • Accounts Receivable accounts are classified as Asset accounts

  8. Sale of Service On Account Transaction 2: Sold services on account to Candy Smith, 100. S1

  9. Sale of Service On Account Transaction 2: Sold services on account to Candy Smith, 100. S1

  10. Receiving Payment for a Previous Sale On Account • When payment (cash) is received on account, the owner’s equity account is NOT effected. (Accounting Concept Realization of Revenue) • Cash is INCREASED and Accounts Receivable is DECREASED.

  11. Receiving a Payment On Account Transaction 3: Received cash on account from Candy Smith, 50. R7

  12. Receiving a Payment On Account Transaction 3: Received cash on account from Candy Smith, 50. R7

  13. Expenses • A transaction to pay for goods or services needed to operate the business results in a decrease in the owner’s equity • An expense is a decrease in owner’s equity resulting from the operation of the business • When cash is paid for expenses, the business has less cash, therefore the owner has less equity in the business

  14. Types of Expenses • What are some expenses an individual or family might have? • Do businesses have similar or different expenses from individuals or families?

  15. Expense Transactions Transaction 4: Paid cash for electric bill, 125. C1011.

  16. Expense Transactions Transaction 4: Paid cash for electric bill, 125. C1011.

  17. Withdrawing Assets • The owner may withdrawal any assets s/he wishes, but usually withdrawals cash. • A withdrawal of assets is NOT considered a transaction necessary to the operation of the business like sales or expenses.

  18. Withdrawing Assets Transaction 5: Owner withdrew cash for personal use, 500. C1012

  19. Withdrawing Assets Transaction 5: Owner withdrew cash for personal use, 500. C1012

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