Changes that Affect Owner’s Equity Chapter 2

Changes that affect OE Revenue ◦Sales ◦Sales on Account Expenses

Revenue Transaction Revenue- An increase in owner’s equity resulting from the operation of the business ◦When we receive cash for a service or good this is revenue ◦When we receive cash…  Cash account will increase  The Owner’s Equity account will increase  EX.Transaction 6, Received cash from sales, $325  Page 26 in textbook

Sold Services on Account Transaction Sale on Account- A sale for which cash will be received at a later date ◦Also known as a charge sale ◦When we sell services or goods on account…  The asset account “Accounts Receivable will increase  The Owner’s Equity will increase  EX. Transaction 7 Sept. 16 Sold services on account to Kids Time, $200  Page 26 in your textbook

Paid Cash for Expense Expense- A decrease in owner’s equity. ◦A decrease in owner’s equity resulting from the operation of a business  When we pay cash for an expense  The cash account will decrease  The owner’s equity account will decrease  EX. Transaction 8 Sept. 16 Paid cash for rent, $250  Page 27 in your textbook

Paid cash to owner for personal use Withdraw- assets taken out of a business for the owner’s personal use ◦Owner’s Equity will decrease ◦Usually cash will also decrease ◦EX. Sept. 16 paid cash to owner for personal use. $100 ◦Pg. 28 in your book