Changes that Affect
Owner’s Equity
Chapter 2

Revenue
◦ Sales
◦ Sales on Account

Expenses
Changes that affect OE

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
Revenue 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
Sold Services on Account
Transaction

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 for Expense

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
Paid cash to owner for personal
use