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    Lesson 6 - The Major Accounts - Notes

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    Joan
    The document discusses how different business transactions affect the accounting equation of Assets = Liabilities + Owner's Equity, showing how each transaction increases or decreases specific asset, liability, and equity accounts. It provides examples of common business transactions like investments, expenses, revenues, and shows the corresponding impact on the accounting equation. The transactions are also shown with numerical values to demonstrate the effect on the asset, liability, and equity accounts.

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    Lesson 6 - The Major Accounts - Notes

    Uploaded by

    Joan
    30 views18 pages
    The document discusses how different business transactions affect the accounting equation of Assets = Liabilities + Owner's Equity, showing how each transaction increases or decreases specific asset, liability, and equity accounts. It provides examples of common business transactions like investments, expenses, revenues, and shows the corresponding impact on the accounting equation. The transactions are also shown with numerical values to demonstrate the effect on the asset, liability, and equity accounts.

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    Lesson 6- The Major Accounts_Notes

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    The document discusses how different business transactions affect the accounting equation of Assets = Liabilities + Owner's Equity, showing how each transaction increases or decreases specific asset, liability, and equity accounts. It provides examples of common business transactions like investments, expenses, revenues, and shows the corresponding impact on the accounting equation. The transactions are also shown with numerical values to demonstrate the effect on the asset, liability, and equity accounts.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    30 views18 pages

    Lesson 6 - The Major Accounts - Notes

    Uploaded by

    Joan
    The document discusses how different business transactions affect the accounting equation of Assets = Liabilities + Owner's Equity, showing how each transaction increases or decreases specific asset, liability, and equity accounts. It provides examples of common business transactions like investments, expenses, revenues, and shows the corresponding impact on the accounting equation. The transactions are also shown with numerical values to demonstrate the effect on the asset, liability, and equity accounts.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 18

    EFFECTS OF

    TRANSACTIONS ON THE
    ACCOUNTING EQUATION
    Fundamentals of Accountancy, Business, and Management 1
    TRANSACTIONS ASSETS LIABILITIES CAPITAL
    Investments + +

    Withdrawals - -

    Service Revenue + +

    Accounts Receivable + +

    Expenses - -

    Accounts Payable + +
    TRANSACTIONS ASSETS LIABILITIES CAPITAL
    Owner invests cash
    Owner invests equipment
    Renders services for cash
    Renders services on credit
    Collects account in
    transaction #4
    Purchases supplies on credit
    Returns defective supplies
    Pays the supplies bought on
    account
    Borrow cash issuing a note
    Purchase land using cash
    Pays utilities expense for the
    month
    Pays the note in full
    TRANSACTIONS ASSETS LIABILITIES CAPITAL
    Owner invests cash INC INC
    Owner invests equipment INC INC
    Renders services for cash INC INC
    Renders services on credit INC INC
    Collects account in INC/DEC
    transaction #4
    Purchases supplies on credit INC INC
    Returns defective supplies DEC DEC
    Pays the supplies bought on DEC DEC
    account
    Borrow cash issuing a note INC INC
    Purchase land using cash INC/DEC
    Pays utilities expense for the DEC DEC
    month
    Pays the note in full DEC DEC
    TRANSACTIONS ASSETS LIABILITIES CAPITAL
    Owner invests cash P 800,000 P 800,000
    Owner invests equipment P 50,000 P 50,000
    Renders services for cash P 25,000 P 25,000
    Renders services on credit P 9,000 P 9,000
    Collects account in P 9,000
    transaction #4
    Purchases supplies on credit 1,000 1,000
    Returns defective supplies P 120 P 120
    Pays the supplies bought on P 880 P 880
    account
    Borrow cash issuing a note P 90,000 P 90,000
    Purchase land using cash P 500,000
    Pays utilities expense for the P 800 P 800
    month
    Pays the note in full P 90,000 P 90,000
    Indicate whether it is an increase (+), decrease (-), or no effect on the asset, liabilities and equity accounts.

    1. Investment of cash in the business


    2. Purchase of computer equipment for cash
    3. Billed a customer for services rendered
    4. Paid salaries expense.
    5. Purchased office supplies on credit
    6. Paid advertising expense
    7. Paid rent in advance for 3 months
    8. Received cash from customers on account
    9. Withdrew cash for personal use
    10. Invested land into the company
    MAJOR ACCOUNTS
    ACCOUNTING EQUATION

    = +
    Assets = Liabilities + Owner’s
    Equity
    Assets
    - anything that a company owns
    ◦ Cash
    ◦ Vehicles
    ◦ Buildings
    ◦ Machinery/Equipment
    ◦ Furniture
    ◦ Supplies
    Current Assets
    Non-Current Assets
    Liabilities
    - what a company owes
    ◦ Accounts Payable
    ◦ Taxes Payable
    ◦ Salaries Payable
    ◦ Notes Payable
    Current Liabilities
    Non-Current Liabilities
    ◦ Loans Payable
    ◦ Mortgage Payable
    Owner’s Equity
    - The amount of money that a company owner has
    personally invested in the company.
    Capital (+)
    Withdrawals (-)
    Revenue (+)
    Expenses (-)
    ◦ Capital is the value of cash and other assets invested in the business by the
    owner of the business.
    ◦ Drawing is an account debited for assets withdrawn by the owner for personal
    use from the business.
    ◦ Income is the Increase in resources resulting from performance of service or
    selling of goods. (Examples: Service revenue for service entities, Sales for
    merchandising and manufacturing companies)
    ◦ Expense is the decrease in resources resulting from the operations of business.
    (Examples: Salaries Expense, Interest Expense, Utilities Expense)
    Withdrawals
    Wages Payable
    Cash

    Salaries Expense

    Supplies Expense
    Revenue
    Land
    Notes Payable

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