1. Chapter 2 Changes that affect Owner’s Equity
Accounting I
Chapter 2
Changes that affect Owner’s Equity

2. TERMS REVIEW revenue sale on account expense withdrawals
Lesson 2-1, page 29

3. TERMS REVIEW
Revenue
An increase in owner’s equity resulting from the operation of a business.
Lesson 2-1, page 26

4. TERMS REVIEW Sale on Account
A sale for which cash will be received at a later date.
Lesson 2-1, page 26

5. TERMS REVIEW Realization of Revenue - concept
Regardless of when cash is received, the revenue is recorded at the time of the sale.
Lesson 2-1, page 26

6. TERMS REVIEW
Expense
A decrease in owner’s equity resulting from the normal operation of the business.
Lesson 2-1, page 27

7. TERMS REVIEW Withdrawals
Assets (not necessarily, but usually, cash) taken out of a business for the owner’s PERSONAL use.
Lesson 2-1, page 28

8. Transaction 6 August 12. Received cash from sales, $325.00.
REVENUE TRANSACTIONS
Transaction 6 August 12. Received cash from sales, $
Transaction 7 August 12. Sold services on account to Kids Time, $
Lesson 2-1, page 26

9. Transaction 8 August 12. Paid cash for rent, $250.00.
PAID CASH FOR EXPENSES
Transaction 8 August 12. Paid cash for rent, $
Transaction 9 August 12. Paid cash for telephone bill, $45.00.
Lesson 2-1, page 27

10. OTHER TRANSACTIONS
Transaction 10 August 12. Received cash on account from Kids Time, $
–100 (withdrawal)
Transaction 11 August 12. Paid cash to owner for personal use, $
Lesson 2-1, page 28

11. Work Together &
On Your Own – Page 29

12. SUMMARY OF CHANGES IN OWNER’S EQUITY
Transaction Change in
Number Kind of Transaction Owner’s Equity
6 Revenue (cash)
7 Revenue (on account)
8 Expense (rent) –250.00
9 Expense (telephone) –45.00
11 Withdrawal –100.00
Net change in owner’s equity
Lesson 2-1, page 28

13. BALANCE SHEET PREPARATION
1. Write the heading. 1
2. Prepare the assets section. 2 3
3. Prepare the liabilities section. 4 6
4. Prepare the owner’s equity section. 5 7 8
5. Add and compare the totals.
6. Rule single lines.
7. Write the totals.
8. Rule double lines.
Lesson 2-2, page 30

14. Work Together &
On Your Own – Page 31