# Accounting. How Business Activities affect the Account Equation transaction - a business activity that changes assets, liabilities, and owners equity.

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Accounting

How Business Activities affect the Account Equation transaction - a business activity that changes assets, liabilities, and owners equity account - a record summarizing all the info pertaining to a single item in the accounting equation account title - the name given to an account account balance - amount in an account received cash = cash increased paid cash = cash decreased

How Business Activities affect the Account Equation received cash = cash increased paid cash = cash decreased get in the habit of 1)read the transaction 2) id the accounts 3) classify the acct. transaction doesn’t always involve both sides of the equation; but the equation will always stay balanced

Transaction 1 August 1, 2008, Received cash from owner as investment

Assets=Liabilities+Owners Equity Cash=Kim Park, Capital \$0 \$0 \$0 +\$5,000+\$5,000 ---------------------------------------------------------------------- \$5,000 \$0 \$5,000 capital - account used to summarize the owners equity in the business Received Cash from Owner as an Investment

Transaction 2 August 3, 2008, Paid cash for supplies, \$275.00

Assets=Liabilities + Owners Equity Cash+ Supplies=Kim Park, Capital \$5,000\$0 \$0\$5,000 -275 +275 --------------------------------- ----------------------------------------------------------- \$4,725 \$275 \$0\$5,000\$5,000 Paid Cash for Supplies

Transaction 3 August 4, 2008, Paid cash for insurance, \$1,200.00

Paid Cash for Insurance Assets= Liabilities + Owners Equity Cash+ Supplies + Prepaid=Kim Park, Insurance Capital \$4,725 \$275 \$0\$0 \$5,000 -1,200 +1,200 ---------------------------------------------------------------------------------------------------------- \$3,525 \$275 \$1,200\$0 \$5,000 \$5,000 \$5,000 Paying cash for insurance changes two assets

Transaction 4 August 7, 2008, Bought Supplies on account from Supply Depot, \$500.00

Bought Supplies on Account Assets = Liabilities + Owners Equity Cash+ Supplies + Prepaid =Supply Kim Park, InsuranceDepotCapital \$3,525 \$275 \$1,200 \$0 \$5,000 +500 +500 ---------------------------------------------------------------------------------------------- \$3,525 \$775 \$1,200 \$500 \$5,000\$5,500 Buying supplies on account changes one asset and one liability

Transaction 5 August 11, 2008, Paid cash on account to Supply Depot, \$300.00

Paid Cash on Account Assets = Liabilities + Owners Equity Cash+ Supplies + Prepaid =Supply Kim Park, InsuranceDepot Capital \$3,525 \$775 \$1,200 \$500 \$5,000 - 300 -300 ---------------------------------------------------------------------------------------------- \$3,225 \$775 \$1,200 \$200 \$5,000\$5,200 Paying cash on account changes one asset and one liability