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

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

A Small Business p. 25 - #1&2

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, $325.00. What accounts are affected? Cash (Assets) & Barbara T Capital (Owner’s Eq)

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, $200.00. On the balance sheet- these sales on account are called...Accounts Receivable- Kid’s Time (daycare fac) What other account is affected?

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, $250.00. What accounts are affected by this transaction?? Transaction 9: August 12. Paid cash for telephone bill, $45.00.

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

2.1 Other Transactions Transaction 10: August 12. Received cash on account from Kids Time, $100.00. 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

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

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

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

Chapter Review pgs. 33-34 Application Problems 2.1-2.3