1. Chapter 2: Starting a Proprietorship
Changes that Affect Owner’s Equity

2. Encore is Ready to Open
Chapter 2- Transactions occurring in daily operation
Cash from sales, selling services on account, paying cash for rent, paying telephone bill, cash to owner for personal use
Increase or decrease owner’s equity

3. A Small Business
p #1&2

4. 2.1- Transactions Change Owner’s Equity
Sale of goods or services increases owner’s equity
An increase in OE resulting from business operations is called revenue
Transaction 6: August 12. Received cash from sales, $
What accounts are affected?
Cash (Assets) & Barbara T Capital (Owner’s Eq)

5. 2.1 Revenue Transactions, cont.
Sales on Account- sale for which cash is paid at a later date (charge sale)
This is usually done along with contract- Encore allows daycare facility to pay at a later date
Transaction 7: August 12. Sold services on account to Kids Time, $
On the balance sheet- these sales on account are called...Accounts Receivable- Kid’s Time (daycare fac)
What other account is affected?

6. 2.1 Cash for Expenses
Transactions to pay for goods and services needed for the business decrease Owner’s Eq
Expense- decrease in Owner’s Eq due to business operations
Transaction 8: August 12. Paid cash for rent, $
What accounts are affected by this transaction??
Transaction 9: August 12. Paid cash for telephone bill, $45.00.

7. Examples of Expenses Advertising Equipment Rental and Repair
Charitable Contributions
Other Miscellaneous

8. 2.1 Other Transactions
Transaction 10: August 12. Received cash on account from Kids Time, $
Encore receives cash from a prior sale
increases cash account AND decreases accounts receivable
Withdrawals- assets taken out of business for owner’s personal use
decreases Owner’s Eq- not a result of normal business practices
Transaction 11: August 12. Paid cash to owner for personal use, $100.00

9. 2.1 On Your Own p. 29 Terms Review Audit Your Understanding #1-3
Work Together #4- wkbk
On Your Own #5 -wkbk

10. 2.2 Balance Sheet
A balance sheet may be prepared on any date to report information
Assets, Liabilities & Owner’s Equity
Balances have Changed in Chapter 2 for Encore so our Balance Sheet has to be revised
Notice Totals are on the same line

11. 2.2 On Your Own p. 31 Audit Your Understanding #1-3
Work Together #4- in workbook
On Your Own #5- in workbook

12. Chapter Review
pgs Application Problems