# LESSON 1-2 How Business Activities Change the Accounting Equation

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LESSON 1-2 How Business Activities Change the Accounting Equation
3/31/2017 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.

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

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

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

TRANSACTIONS ON ACCOUNT
page 12 Transaction 4 August 7. Bought supplies on account from Supply Depot, \$ Transaction 5 August 11. Paid cash on account to Supply Depot, \$ LESSON 1-2

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 Trans. No. Assets = Liabilities Owner’s Equity 1. 2. 3. 4. + + + + +, - - -

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 Trans. No. Assets = Liabilities Owner’s Equity 1. 2. 3. 4. 5. + + + + +, - +, - - - LESSON 1-2

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. TERMS REVIEW transaction account account title account balance capital LESSON 1-2

1-2 APPLICATION PROBLEM Trans. No.
LESSON 1-2 3/31/2017 1-2 APPLICATION PROBLEM Trans. No. Assets = Liabilities Owner’s Equity Accts. Pay Accts Pay Calvin Five Star Riverland Parrish Cash Supplies +Insurance = Supply Co Capital Beg. Bal 1. 2. 3. 4. 5. 6. 7. 8. New Bal. +3,000 +3,000 3,000 3,000 -1,600 +1,600 1,400 1,600 3,000 +700 +700 700 1,600 1,400 700 3,000 +300 +300 1,400 1,000 1,600 700 300 3,000 -700 -700 700 1,000 1,600 300 3000 -200 -200 500 1,000 1,600 100 3,000 -100 +100 400 1,100 1,600 100 3,000 +1,500 +1,500 1,900 1,100 1,600 100 4,500