THE ACCOUNTING EQUATION
Lesson 1-1, page 7
© 2000 South-Western
Educational Publishing
TERMS REVIEW
accounting
accounting system
accounting records
service business
proprietorship
asset
equities
liability
owner’s equity
accounting equation
Lesson 1-1, page 8
© 2000 South-Western
Educational Publishing
RECEIVING CASH
Transaction 1 August 1. Received cash from
owner an an investment, $10,000.00.
Lesson 1-2, page 9
© 2000 South-Western
Educational Publishing
PAYING CASH
Transaction 2 August 3. Paid cash for supplies, $1,577.00.
Transaction 3 August 4. Paid cash for insurance,
$1,200.00.
Lesson 1-2, page 10
© 2000 South-Western
Educational Publishing
TRANSACTIONS ON ACCOUNT
Transaction 4 August 7. Bought supplies on account
from Ling Music Supplies, $2,720.00.
Transaction 5 August 11. Paid cash on account to
Ling Music Supplies, $1,360.00.
Lesson 1-2, page 11
© 2000 South-Western
Educational Publishing
TERMS REVIEW
transaction
account
account title
account balance
capital
Lesson 1-2, page 12
© 2000 South-Western
Educational Publishing
RECEIVED CASH FROM SALES
August 12. Received cash from sales, $325.00.
2
1
2
1
4
4
3
3
1. Cash and Sales are affected.
2. Cash is an asset. Sales is a revenue account that
affects owner’s equity.
3. Assets are increased. Owner’s equity is increased.
4. Cash is debited. Sales is credited.
Lesson 3-3, page 51
© 2000 South-Western
Educational Publishing
SOLD SERVICES ON ACCOUNT
August 12. Sold services on account to Kids Time, $200.00.
2
1
2
1
4
4
3
3
1. Accounts Receivable—Kids Time and Sales are affected.
2. Accounts Receivable—Kids Time is an asset. Sales
is a revenue account that affects owner’s equity.
3. Assets are increased. Owner’s equity is increased.
4. Accounts Receivable—Kids Time is debited. Sales is
Lesson 3-3, page 52
©
2000
South-Western
credited.
Educational Publishing
PAID CASH FOR AN EXPENSE
August 12. Paid cash for rent, $250.00.
2
2
1
4
3
1
1. Rent Expense and
4
Cash are affected.
2. Cash is an asset. Rent
3
3
Expense is an expense
account that affects
owner’s equity.
3. Assets are decreased. Owner’s equity is decreased;
expenses are increased.
4. Rent Expense is debited. Cash is credited.
Lesson 3-3, page 53
© 2000 South-Western
Educational Publishing
RECEIVED CASH ON ACCOUNT
August 12. Received cash on account from Kids Time, $100.00.
2
1
1
4
4
3
3
1. Cash and Accounts Receivable—Kids Time are affected.
2. Cash and Accounts Receivable—Kids Time are assets.
3. Assets (Cash) are increased. Assets (Accounts
Receivable—Kids Time) is decreased.
4. Cash is debited. Accounts Receivable—Kids Time
Lesson 3-3, page 54
©
2000
South-Western
is credited.
Educational Publishing
PREPARING A BALANCE SHEET
1. Write the heading.
2. Prepare the assets
section.
3. Prepare the
2
liabilities section.
4. Prepare the
6
5
owner’s equity
8
section.
5. Add amounts and compare the totals.
6. Rule single lines.
7. Write the totals.
8. Rule double lines.
1
3
4
7
Lesson 1-3, page 14
© 2000 South-Western
Educational Publishing
TERMS REVIEW
balance sheet
Lesson 1-3, page 15
© 2000 South-Western
Educational Publishing
REVENUE TRANSACTIONS
Transaction 6 August 12. Received cash from sales,
$325.00.
Transaction 7 August 12. Sold services on
account to Kids Time, $200.00.
Lesson 2-1, page 26
© 2000 South-Western
Educational Publishing
PAID CASH FOR EXPENSES
Transaction 8 August 12. Paid cash for rent, $250.00.
–45 (expense)
Transaction 9 August 12. Paid cash for telephone
bill, $45.00.
Lesson 2-1, page 27
© 2000 South-Western
Educational Publishing
OTHER TRANSACTIONS
Transaction 10 August 12. Received cash on account
from Kids Time, $100.00.
–100 (withdrawal)
Transaction 11 August 12. Paid cash to owner for
personal use, $100.00.
Lesson 2-1, page 28
© 2000 South-Western
Educational Publishing
SUMMARY OF CHANGES IN OWNER’S EQUITY
Transaction
Number
Change in
Owner’s Equity
Kind of Transaction
6
7
8
9
11
Revenue (cash)
Revenue (on account)
Expense (rent)
Expense (telephone)
Withdrawal
+325.00
+200.00
–250.00
–45.00
–100.00
Net change in owner’s equity
+130.00
Lesson 2-1, page 28
© 2000 South-Western
Educational Publishing
TERMS REVIEW
revenue
sale on account
expense
withdrawals
Lesson 2-1, page 29
© 2000 South-Western
Educational Publishing
BALANCE SHEET PREPARATION
1. Write the heading.
2. Prepare the assets
section.
3. Prepare the liabilities
section.
4. Prepare the owner’s
equity section.
5. Add and compare the
totals.
6. Rule single lines.
7. Write the totals.
8. Rule double lines.
1
2
3
4
5
6
8
7
Lesson 2-2, page 30
© 2000 South-Western
Educational Publishing
ACCOUNTS
Lesson 3-1, page 42
© 2000 South-Western
Educational Publishing
ACCOUNT BALANCES
Lesson 3-1, page 42
© 2000 South-Western
Educational Publishing
INCREASES AND DECREASES IN ACCOUNTS
Lesson 3-1, page 43
© 2000 South-Western
Educational Publishing
TERMS REVIEW
T account
debit
credit
normal balance
Lesson 3-1, page 44
© 2000 South-Western
Educational Publishing
A FIVE-COLUMN JOURNAL
Lesson 4-1, page 66
© 2000 South-Western
Educational Publishing
CHECKS
Lesson 4-1, page 67
© 2000 South-Western
Educational Publishing
RECEIVED CASH FROM OWNER AS AN INVESTMENT
August 1. Received cash from owner an an investment, $10,000.00.
2
1
2
1
4
4
3
3
1. Cash and Barbara Treviño, Capital are affected.
2. Cash is an asset account. Barbara Treviño, Capital is
an owner’s equity account.
3. Assets are increased. Owner’s Equity is increased.
4. Cash is debited. Barbara Treviño, Capital is credited.
Lesson 3-2, page 45
© 2000 South-Western
Educational Publishing
PAID CASH FOR SUPPLIES
August 3. Paid cash for supplies, $1,577.00.
2
1
1
4
4
3
3
1. Supplies and Cash are affected.
2. Supplies and Cash are assets.
3. Assets (Supplies) are increased. Assets (Cash) are
decreased.
4. Supplies is debited. Cash is credited.
Lesson 3-2, page 46
© 2000 South-Western
Educational Publishing
PAID CASH FOR INSURANCE
August 4. Paid cash for insurance, $1,200.00.
2
1
1
4
4
3
3
1. Prepaid Insurance and Cash are affected.
2. Prepaid Insurance and Cash are assets.
3. Assets (Prepaid Insurance) are increased. Assets
(Cash) are decreased.
4. Prepaid Insurance is debited. Cash is credited.
Lesson 3-2, page 47
© 2000 South-Western
Educational Publishing
BOUGHT SUPPLIES ON ACCOUNT
August 7. Bought supplies on account from Ling Music Supplies,
$2,720.00.
2
1
2
1
4
4
3
3
1. Supplies and Accounts Payable—Ling Music Supplies are affected.
2. Supplies is an asset. Accounts Payable—Ling Music
Supplies is a liability.
3. Assets are increased. Liabilities are increased.
4. Supplies is debited. Accounts Payable—Ling Music
Lesson 3-2, page 48
©
2000
South-Western
Supplies is credited.
Educational Publishing
PAID CASH ON ACCOUNT
August 11. Paid cash on account to Ling Music Supplies,
$1,360.00.
2
1
2
1
4
4
3
3
1. Accounts Payable—Ling Music Supplies and Cash are affected.
2. Cash is an asset. Accounts Payable—Ling Music
Supplies is a liability.
3. Assets are decreased. Liabilities are decreased.
4. Accounts Payable—Ling Music Supplies is debited.
Lesson 3-2, page 49
©
2000
South-Western
Cash is credited.
Educational Publishing
TERMS REVIEW
chart of accounts
Lesson 3-2, page 50
© 2000 South-Western
Educational Publishing
SALES INVOICES
Lesson 4-1, page 67
© 2000 South-Western
Educational Publishing
OTHER SOURCE DOCUMENTS
Lesson 4-1, page 68
© 2000 South-Western
Educational Publishing
RECEIVED CASH FROM OWNER AS AN INVESTMENT
August 1. Received cash from owner as an investment,
$10,000.00. Receipt No. 1.
Lesson 4-1, page 69
© 2000 South-Western
Educational Publishing
RECEIVED CASH FROM OWNER AS AN INVESTMENT
August 1. Received cash from owner as an investment,
$10,000.00. Receipt No. 1.
Cash
1. Which accounts are affected?
Cash
Barbara Treviño, Capital
2. How is each account classified?
Cash is an asset account.
Barbara Treviño, Capital is an owner’s equity
account.
Debit
Normal Balance
10,000.00

Barbara Treviño, Capital
3. How is each classification changed?
Assets are increased.
Owner’s equity is increased.
4. How is each amount entered in the accounts?
Assets increase on the debit side.
Owner’s equity accounts increase on the credit side.
Credit
Normal Balance
10,000.00

Lesson 4-1, page 69
© 2000 South-Western
Educational Publishing
RECEIVED CASH FROM OWNER AS AN INVESTMENT
August 1. Received cash from owner as an investment,
$10,000.00. Receipt No. 1.
1
2
4
3
1. Write the date.
2. Debit Cash.
3
3. Credit Barbara
Treviño, Capital.
4. Write the source
document number.
Lesson 4-1, page 69
© 2000 South-Western
Educational Publishing
PAID CASH FOR SUPPLIES
1
2
4
2
1. Write the date.
2. Debit Supplies.
3. Credit Cash.
4. Write the source document number.
3
Lesson 4-1, page 70
© 2000 South-Western
Educational Publishing
TERMS REVIEW
journal
journalizing
special amount column
general amount column
entry
double-entry accounting
source document
check
invoice
sales invoice
receipt
memorandum
Lesson 4-1, page 71
© 2000 South-Western
Educational Publishing