© 2014 Cengage Learning. All Rights Reserved. Do Now: ●Today you will learn about sales and its effect on Owner’s Equity ●Write down different payment options you have when making a purchase ●What is a transaction is and what are different transactions a typical proprietorship may engage i? ●Take out homework for review LO6 Lesson 1-3 SLIDE 1

© 2014 Cengage Learning. All Rights Reserved. Transactions Affecting Owner’s Equity ●An increase in equity resulting from the sale of goods or services is called revenue. ●When cash is received from a sale, total amount of both assets and owner’s equity is increased ●A sale for which payment will be received at a later date is called a sale on account. ●Realization of Revenue: revenue recorded at time goods or services are sold as opposed to when payment is made LO6 Lesson 1-3 SLIDE 2

© 2014 Cengage Learning. All Rights Reserved. Transactions Affecting Owner’s Equity LO6 Transaction 7 January 12. Sold services on account to Main Street Services, $ Transaction 6 January 10. Received cash from sales, $1, Lesson 1-3 SLIDE 3

© 2014 Cengage Learning. All Rights Reserved. Transactions Affecting Owner’s Equity LO6 Total of left side: $1,935 + $500 + $385 + $900 = $3,720 Total of right side: $120 + $3,600 = $3,720 Lesson 1-3 SLIDE 4

© 2014 Cengage Learning. All Rights Reserved. Expense Transactions ●Unlike a liability, which is an amount that is owed, the cost of goods or services used to operate a business is called an expense. ●Telephone, internet, rent, advertising, and utilities are common LO7 Lesson 1-3 SLIDE 5

© 2014 Cengage Learning. All Rights Reserved. Expense Transactions LO7 Transaction 8 January 12. Paid cash for communications bill for cell phone and Internet service, $ Lesson 1-3 SLIDE 6

© 2014 Cengage Learning. All Rights Reserved. Expense Transactions LO7 Transaction 9 January 13. Paid cash for equipment rental, $ Lesson 1-3 SLIDE 7

© 2014 Cengage Learning. All Rights Reserved. Other Cash Transactions ●Assets taken from the business for the owner’s personal use are called withdrawals. ● Decreases owner’s equity Lesson 1-3 SLIDE 8

© 2014 Cengage Learning. All Rights Reserved. Other Cash Transactions Transaction 11 January 16. Michael Delgado withdrew equity in the form of cash, $ Transaction 10 January 16. Received cash on account from Main Street Services, $ Lesson 1-3 SLIDE 9

© 2014 Cengage Learning. All Rights Reserved. Summary of Changes in Owner’s Equity Transaction Number Kind of Transaction Change in Owner’s Equity 6Revenue (cash)+1, Revenue (on account) Expense (communications)– Expense (equipment rental)– Withdrawal of equity– Net change in owner’s equity Lesson 1-3 SLIDE 10

© 2014 Cengage Learning. All Rights Reserved. Lesson 1-3 Audit Your Understanding 1.How is owner’s equity affected when cash is received from sales? SLIDE 11 ANSWER Owner’s equity is increased. Lesson 1-3

© 2014 Cengage Learning. All Rights Reserved. Lesson 1-3 Audit Your Understanding 2.How is owner’s equity affected when services are sold on account? SLIDE 12 ANSWER Owner’s equity is increased. Lesson 1-3

© 2014 Cengage Learning. All Rights Reserved. Lesson 1-3 Audit Your Understanding 3.How is owner’s equity affected when cash is paid for expenses? SLIDE 13 ANSWER Owner’s equity is decreased. Lesson 1-3

© 2014 Cengage Learning. All Rights Reserved. Class Work ●1-3 Work Together ●Individual Work: complete 1-3 OYO ●Reciprocal Teaching: approach board to demonstrate completion Application Problem 1-3 & Application Problem 1-4 (text pages 25, 26, & 27) at front of room SLIDE 14

© 2014 Cengage Learning. All Rights Reserved. Review Game: ●Chapter 1 terms review game using SuperTeacher tools chapter 1 speed review game ●Break up into 2 teams, with bells ●Team that wins receives 2 extra credit points on test ●Then begin Mastery Problem SLIDE 15

© 2014 Cengage Learning. All Rights Reserved. Homework ●Finish Chapter 1 Mastery Problem ●Complete Chapter 1 Challenge Problem ●Complete Chapter 1 Crossword Puzzle ●Closure: How else can one record transactions besides using the accounting equation? SLIDE 16

© 2014 Cengage Learning. All Rights Reserved. Fist of Five ●How comfortable are you with chapter 1 material? 1.No idea 2.Somewhat understand 3.Comfortable 4.Can test well with the information 5.Can teach to peers SLIDE 17

© 2014 Cengage Learning. All Rights Reserved. Do Now: ●Take out crossword puzzle, mastery problem and challenge problem and compare answers with classmates around you ●Parking Lot: Write Down any questions you have regarding Chapter 1 ●If you do not have any questions but, rather, answers, please answer the questions on the front board for your fellow classmates ●Individually: draw a diagram of containing types of transactions that increase Owner’s Equity and types that decrease Owner’s Equity SLIDE 18

© 2014 Cengage Learning. All Rights Reserved. Closure: ●Cross-Curricular Connections: Are there different types of spending you have? If so, what are they? SLIDE 19