2. 3. Compare and contrast the accounting equation
with 85% accuracy by:
a. Balancing the accounting equation
b. Listing & defining its parts
c. Recording increase and decrease sides of each
part
d. Identifying the effect of various business
transactions on each part
e. Defining accounting terms in chapter
3. a. Listing & defining
its parts
Assets =
Liabilities ┼
Owner’s Equity
4. a. Balance the accounting equation.
Assets $12,000 =Liabilities $4,000 + OE $8,000
Assets $22,000 = Liabilities 12,000 + OE $10,000
Assets $40,000 = Liabilities $10,000 + OE 30,000
Go to page 28 in workbook & page 49 in book.
5. b. Listing & defining the
accounting equation’s parts.
Event that causes change in account
equation: assets, liabilities or owner’s
equity
9. Accounts Payable
Federal Employees
Income tax Payable
Social Security Tax
Payable
Medicare Tax Payable
Union Dues Payable
U.S. Savings Bond Payable
11. Mary Smith, Capital
Mary Smith, Withdrawal
Revenue (money earned)
Expenses (money paid out)
12. Every business has accounts
Accounts show balance or
how much money is in each
account
13. Every transaction must have at least
two accounts that are affected;
Names of accounts set up under
specific categories in accounting
equation
14.
15. Sept 3 Wrote a check for $36,000 for
purchase of equipment.
Bought Equipment, so asset account
“Equipment” by $36,000.
Writing check affects Cash in Bank
account, Cash in Bank account
by 36,000.
16. Sept. 5 Bought a chair with cash
for $250.
Office Equipment is asset – purchase
of chair account by $250.
Business paid cash, Cash in the Bank
account by $250.
17. Since desk is sold, Office Equipment
assets by $500.
Client purchases desk on account and
still owes money, Accounts Receivable
by $500.
18. Aug 13 Business issues a $3,000 check to
purchase a computer.
Computer is asset to business, so Office
Equipment by $3,000.
Wrote check so assets Cash in Bank is
by $3,000.
19.
20. Revenue: money received from sale
of services either for cash or on
account
Services or Fees: another name for
revenue in a service business
21. Sept 9 Sold services (fees) for $1000 on account
for preparing reports for a client.
Since customer “charged” services, account
used is Accounts Receivable. A/R by
$1,000.
$1,000 fee is income for business, so capital
account by $1,000.
22. Expense: price paid for services used to
operate the business---
rent, salaries, telephone, water, etc..
Expenses decrease owner’s equity.
23. Sept 15 Business writes a check for $750 to pay
for rent for month.
Cash in Bank is by $750.
Rent is expense to business, so
Owner’s Equity is by $750.
24. Sept 20 Business writes a check for $1,200
to pay for heat & electricity
(utilities).
Cash in Bank is by $1200.
Utilities is expense to business, so
Owner’s Equity is by $1200.
25. Investments: used whenever owner of
business gives or donates assets (either
money or objects) to business.
26. Sept. 12 Owner invests $500 in business.
Since the owner gives money to
business, Cash in Bank account by
$500.
Since owner has more money added to
worth of business, capital account/owner’s
equity by $500
27. Sept. 12 Owner invests $1,500 worth of
equipment into business.
Since the owner gives equipment to
business, Equipment account by $1,500.
Since owner has more worth added to
business, capital account/owner’s equity
by $1,500.
29. Sept. 12 Owner withdraws $900 cash from
business for personal use.
Since owner takes money out of business for
personal use, Cash in Bank account by
$900.
Because of this withdrawal of money, value of
business (OE) by $900.
30. Sept. 12 Owner withdraws $100 worth of
supplies from business for personal
use.
Since owner took supplies for personal use,
Office Supplies account by $100.
Because of withdrawal of supplies, worth of
business is by $100.
Go to page 60 in book & page 29 in workbook.
