1. How Transactions Change Owner’s Equity in an Accounting Equation
Lesson 1-3
4/25/2019
LESSON 1-3
How Transactions Change Owner’s Equity in an Accounting Equation

2. Increase in Owner’s Equity
An increase in owner’s equity resulting from the operation of a business is revenue.
The sale of goods or services increases owner’s equity.
Transactions:
Received cash from sales means that cash is received immediately upon the sale of merchandise or services and revenue is recorded.
Sold services on account means that cash will be received at a later date for merchandise or services sold, and revenue is recorded immediately.
LESSON 1-3

3. Decrease to Owner’s Equity
A decrease in owner’s equity resulting from the operation of a business is an expense.
The asset cash is decreased and the owner’s equity capital is also decreased.
CASH
CAPITAL (expense)
LESSON 1-3

4. Decrease to Owner’s Equity
Anytime cash is taken out of a business by the owner for their personal use it is called a withdrawal.
Withdrawals decrease owner’s equity.
CASH
CAPITAL (withdrawal)
LESSON 1-3

5. REVENUE TRANSACTIONS
page 14
Transaction 6 August 12. Received cash from sales, $
Transaction 7 August 12. Sold services on account to Oakdale School, $
LESSON 1-3

6. EXPENSE TRANSACTIONS
page 15
Transaction 8 August 12. Paid cash for rent, $
Transaction 9 August 12. Paid cash for telephone bill, $40.00.
LESSON 1-3

7. OTHER CASH TRANSACTIONS
page 16
Transaction 10 August 12. Received cash on account from Oakdale School, $
Transaction 11 August 12. Paid cash to owner for personal use, $
LESSON 1-3

8. 1-3 WT
LESSON 1-3

9. LESSON 1-3