Lesson 1-1 - Davison Accounting

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LESSON 1-3
How Transactions Change
Owner’s Equity in an
Accounting Equation
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
2
REVENUE
When a business sells merchandise or
services
Results in an increase in owner’s equity
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-3
3
SALE ON ACCOUNT
 Sale where cash is received at a later date
 Buy merchandise now and pay in 30 days
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-3
4
REALIZATION OF REVENUE
 Accounting concept
 Revenue must be recorded at the time of sale
 Regardless of when payment is made
 Even when bought on account
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-3
5
EXPENSE
 Transaction to pay for goods or services needed to
operate a business
 Results in a decrease to owner’s equity
 Opposite of revenue
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-3
6
WITHDRAWALS
 Assets taken out a business for the owner’s personal
use
 Can be any asset
 Usually the owner takes out cash
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-3
7
REVENUE TRANSACTIONS
page 14
Transaction 6 August 12. Received cash from sales, $295.00.
Transaction 7 August 12. Sold services on account to Oakdale
School, $350.00.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-3
8
EXPENSE TRANSACTIONS
page 15
Transaction 8 August 12. Paid cash for rent, $300.00.
Transaction 9 August 12. Paid cash for telephone bill, $40.00.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-3
9
OTHER CASH TRANSACTIONS
page 16
Transaction 10 August 18. Received cash on account from
Oakdale School, $200.00.
Transaction 11 August 18. Paid cash to owner for personal use,
$125.00.
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 1-3
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