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Bookkeeping NCIII Lecture 3.2

The document discusses the accounting equation and how it applies to business transactions. The accounting equation states that assets equal liabilities plus owner's equity. The document then works through examples of common business transactions, such as depositing cash, purchasing supplies, earning and paying expenses, and withdrawing funds, to demonstrate how the accounting equation is updated with each transaction.

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jvtg994
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24 views

Bookkeeping NCIII Lecture 3.2

The document discusses the accounting equation and how it applies to business transactions. The accounting equation states that assets equal liabilities plus owner's equity. The document then works through examples of common business transactions, such as depositing cash, purchasing supplies, earning and paying expenses, and withdrawing funds, to demonstrate how the accounting equation is updated with each transaction.

Uploaded by

jvtg994
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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BOOKKEEPING 03.

TRANSACTIONAL
ANALYSIS

Presented by:
MS. ALICIA G. BAÑAS
THE ACCOUNTING EQUATION
What are an organization’s resources called?

Resources

01
THE ACCOUNTING EQUATION
What are an organization’s resources called?

Resources

Assets

Cost of resources
used in the business

02
THE ACCOUNTING EQUATION
What are an organization’s resources called?

Resources = Sources

Assets

Cost of resources
used in the business

03
THE ACCOUNTING EQUATION
What are an organization’s resources called?

Resources = Sources

Liabilities
Assets
Owner’s Equity

Cost of resources Resources supplied


used in the business by creditors & owners

04
THE ACCOUNTING EQUATION

Resources = Sources

Liabilities
Assets
Owner’s Equity

Cost of resources Resources supplied


used in the business by creditors & owners

05
THE ACCOUNTING EQUATION

Assets = Liabilities and Owner’s Equity

Assets - Liabilities = Owner’s Equity

06
ASSETS
What are your assets?

Resources owned by the


business
Cash, land, buildings,
equipment

07
LIABILITIES
Say you borrowed $5 from your friend
for lunch. You have a liability or debt of
$5. You friend is your creditor.

08
OWNER’S EQUITY
Amounts belonging to the owner.
Say Sally puts $10,000 into the
business. Therefore $10,000 of the
business belongs to Sally. Owner’s
equity = $10,000

09
BUSINESS TRANSACTION
a. Chris Henson deposits $25,000 in a bank account for NetSolutions.

ASSETS LIABILITIES

= OWNER’S EQUITY

10
BUSINESS TRANSACTION
a. Chris Henson deposits $25,000 in a bank account for NetSolutions.

ASSETS LIABILITIES

Cash
25,000
= OWNER’S EQUITY

11
BUSINESS TRANSACTION
a. Chris Henson deposits $25,000 in a bank account for NetSolutions.

ASSETS LIABILITIES

Cash
25,000
= OWNER’S EQUITY
Chris Henson,
Capital
25,000

12
BUSINESS TRANSACTION
b. NetSolutions buys land for $20,000.

ASSETS LIABILITIES

= OWNER’S EQUITY

13
BUSINESS TRANSACTION
b. NetSolutions buys land for $20,000.

ASSETS LIABILITIES

Cash
(20,000)
= OWNER’S EQUITY

14
BUSINESS TRANSACTION
b. NetSolutions buys land for $20,000.

ASSETS LIABILITIES
Cash
(20,000)
= OWNER’S EQUITY
Land
20,000

15
BUSINESS TRANSACTION
c. NetSolutions buys supplies for $1,350, agreeing to pay the supplier
in the near future.

ASSETS LIABILITIES

= OWNER’S EQUITY

16
BUSINESS TRANSACTION
c. NetSolutions buys supplies for $1,350, agreeing to pay the supplier
in the near future.

ASSETS LIABILITIES

Supplies
1,350
= OWNER’S EQUITY

17
BUSINESS TRANSACTION
c. NetSolutions buys supplies for $1,350, agreeing to pay the supplier
in the near future.

ASSETS LIABILITIES
Accounts Payable
Supplies 1,350
1,350
= OWNER’S EQUITY

18
BUSINESS TRANSACTION
d. NetSolutions earns fees of $7,500, receiving cash.

ASSETS LIABILITIES

= OWNER’S EQUITY

19
BUSINESS TRANSACTION
d. NetSolutions earns fees of $7,500, receiving cash.

ASSETS LIABILITIES

Cash
7,500
= OWNER’S EQUITY

20
BUSINESS TRANSACTION
d. NetSolutions earns fees of $7,500, receiving cash.

ASSETS LIABILITIES

Cash
7,500
= OWNER’S EQUITY
Fees Earned
7,500

21
BUSINESS TRANSACTION
e. NetSolutions paid: salaries, $2,125; rent, $800; utilities, $450; and
miscellaneous, $275.

ASSETS LIABILITIES

= OWNER’S EQUITY

22
BUSINESS TRANSACTION
e. NetSolutions paid: salaries, $2,125; rent, $800; utilities, $450; and
miscellaneous, $275.

ASSETS LIABILITIES

Cash
(3,650)
= OWNER’S EQUITY

23
BUSINESS TRANSACTION
e. NetSolutions paid: salaries, $2,125; rent, $800; utilities, $450; and
miscellaneous, $275.

ASSETS LIABILITIES

Cash
(3,650)
= OWNER’S EQUITY
Expenses
(3,650)

24
BUSINESS TRANSACTION
f. NetSolutions pays $950 to creditors on account.

ASSETS LIABILITIES

= OWNER’S EQUITY

25
BUSINESS TRANSACTION
f. NetSolutions pays $950 to creditors on account.

ASSETS LIABILITIES

Cash
(950)
= OWNER’S EQUITY

26
BUSINESS TRANSACTION
f. NetSolutions pays $950 to creditors on account.

ASSETS LIABILITIES
Accounts Payable
Cash (950)
(950)
= OWNER’S EQUITY

27
BUSINESS TRANSACTION
g. At the end of the month, the cost of supplies on hand is $550.

ASSETS LIABILITIES

= OWNER’S EQUITY

28
BUSINESS TRANSACTION
g. At the end of the month, the cost of supplies on hand is $550.

ASSETS LIABILITIES

Supplies
(800)
= OWNER’S EQUITY

29
BUSINESS TRANSACTION
g. At the end of the month, the cost of supplies on hand is $550.

ASSETS LIABILITIES

Supplies
(800)
= OWNER’S EQUITY
Supplies Expense
(800)

30
BUSINESS TRANSACTION
h. Chris Henson withdraws $2,000 in cash.

ASSETS LIABILITIES

= OWNER’S EQUITY

31
BUSINESS TRANSACTION
h. Chris Henson withdraws $2,000 in cash.

ASSETS LIABILITIES

Cash
(2,000)
= OWNER’S EQUITY

32
BUSINESS TRANSACTION
h. Chris Henson withdraws $2,000 in cash.

ASSETS LIABILITIES

Cash
(2,000)
= OWNER’S EQUITY
Chris Henson,
Drawing
(2,000)

33
TRANSACTION SUMMARY
ASSETS LIABILITIES

Cash 5,900
Supplies 550
OWNER’S EQUITY
Land 20,000

34
TRANSACTION SUMMARY
ASSETS LIABILITIES

Cash 5,900 Accounts Payable 400


Supplies 550
OWNER’S EQUITY
Land 20,000

35
TRANSACTION SUMMARY
ASSETS LIABILITIES

Cash 5,900 Accounts Payable 400


Supplies 550
OWNER’S EQUITY
Land 20,000 C. Henson, Capital 25,000
C. Henson, Drawing (2,000)
= Fees Earned 7,500
Salaries Expense (2,125)
Rent Expense (800)
Supplies Expense (800)
Utilities Expense (450)
Misc. Expense (275)
26,050
36
EFFECTS OF TRANSACTIONS ON
OWNER’S EQUITY
OWNER’S EQUITY

decreased by increased by

Owner’s withdrawals Owner’s investments

Expenses Revenues

37
FINANCIAL
STATEMENTS

38
NetSolutions
Statement of Comprehensive Income
For the Month Ended November 30, 2011

Fees Earned $ 7,500


Operating Expense:
Salaries expense $ 2,125
Rent expense 800
Supplies expense 800
Utilities expense 450
Miscellaneous expense 275
Total operating expense 4,450
Net profit $ 3,050

39
NetSolutions
Statement of Comprehensive Income
For the Month Ended November 30, 2011

Fees Earned $ 7,500


Operating Expense:
Salaries expense $ 2,125
Rent expense 800
Supplies expense 800
Utilities expense 450
Miscellaneous expense 275
Total operating expense 4,450
Net profit $ 3,050

40
NetSolutions
Statement of Comprehensive Income
For the Month Ended November 30, 2011

Fees Earned $ 7,500


Operating Expense:
Salaries expense $ 2,125
Rent expense 800
Supplies expense 800
Utilities expense 450
Miscellaneous expense 275
Total operating expense 4,450
Net profit $ 3,050

41
NetSolutions
Statement of Owner’s Equity
For the Month Ended November 30, 2011

Chris Henson, Capital, November 1, 2011 $ 25,000


Investment on November 1, 2011 3,050
Net profit for November $ 28,050
Less: Withdrawals (2,000)
Increase in Owner’s Equity 26,060
Chris Henson, Capital, November 30, 2011 $ 26,050

42
NetSolutions
Statement of Owner’s Equity
For the Month Ended November 30, 2011

Chris Henson, Capital, November 1, 2011 $ 25,000


Investment on November 1, 2011 3,050
Net profit for November $ 28,050
Less: Withdrawals (2,000)
Increase in Owner’s Equity 26,060
Chris Henson, Capital, November 30, 2011 $ 26,050

43
NetSolutions
Statement of Owner’s Equity
For the Month Ended November 30, 2011

Chris Henson, Capital, November 1, 2011 $ 25,000


Investment on November 1, 2011 3,050
Net profit for November $ 28,050
Less: Withdrawals (2,000)
Increase in Owner’s Equity 26,060
Chris Henson, Capital, November 30, 2011 $ 26,050

44
NetSolutions
Statement of Owner’s Equity
For the Month Ended November 30, 2011

Chris Henson, Capital, November 1, 2011 $ 25,000


Investment on November 1, 2011 3,050
Net profit for November $ 28,050
Less: Withdrawals (2,000)
Increase in Owner’s Equity 26,060
Chris Henson, Capital, November 30, 2011 $ 26,050

45
NetSolutions
Statement of Financial Position
For the Month Ended November 30, 2011

Assets
Cash $ 5,900
Supplies 550
Land 20,000
$ 26,450
Total assets
Liabilities
Accounts Payable $ 400
Owner’s Equity
Chris Henson, Capital, November 1, 2011 $ 25,000
Investment on November 1, 2011 3,050
Net profit for November $ 28,050
Less: Withdrawals (2,000)
Increase in Owner’s Equity 26,060
Chris Henson, Capital, November 30, 2011 $ 26,050
Total liabilities and owner’s equity $ 26,450

46
NetSolutions
Statement of Financial Position
For the Month Ended November 30, 2011

Assets
Cash $ 5,900
Supplies 550
Land 20,000
$ 26,450
Total assets
Liabilities
Accounts Payable $ 400
Owner’s Equity
Chris Henson, Capital, November 1, 2011 $ 25,000
Investment on November 1, 2011 3,050
Net profit for November $ 28,050
Less: Withdrawals (2,000)
Increase in Owner’s Equity 26,060
Chris Henson, Capital, November 30, 2011 $ 26,050
Total liabilities and owner’s equity $ 26,450

47
NetSolutions
Statement of Financial Position
For the Month Ended November 30, 2011

Assets
Cash $ 5,900
Supplies 550
Land 20,000
$ 26,450
Total assets
Liabilities
Accounts Payable $ 400
Owner’s Equity
Chris Henson, Capital, November 1, 2011 $ 25,000
Investment on November 1, 2011 3,050
Net profit for November $ 28,050
Less: Withdrawals (2,000)
Increase in Owner’s Equity 26,060
Chris Henson, Capital, November 30, 2011 $ 26,050
Total liabilities and owner’s equity $ 26,450

48
NetSolutions
Statement of Cash Flows
For the Month Ended November 30, 2011

Cash flows from operating activities:


Cash received from customers $ 7,500
Deduct cash payments for expenses 4,600
Net cash flow from operating activities $ 2,900

Cash flows from investing activities:


Cash payments for purchase of land (20,000)

Cash flows from financing activities:


Cash received as owner’s investment 25,000
Deduct cash withdrawal by owner (2,000)
Net cash flow from financing activities 23,000
Net cash flow and Nov. 30, 2011 cash balance $ 5,900

49
NetSolutions
Statement of Cash Flows
For the Month Ended November 30, 2011

Cash flows from operating activities:


Cash received from customers $ 7,500
Deduct cash payments for expenses 4,600
Net cash flow from operating activities $ 2,900

Cash flows from investing activities:


Cash payments for purchase of land (20,000)

Cash flows from financing activities:


Cash received as owner’s investment 25,000
Deduct cash withdrawal by owner (2,000)
Net cash flow from financing activities 23,000
Net cash flow and Nov. 30, 2011 cash balance $ 5,900

50
NetSolutions
Statement of Cash Flows
For the Month Ended November 30, 2011

Cash flows from operating activities:


Cash received from customers $ 7,500
Deduct cash payments for expenses 4,600
Net cash flow from operating activities $ 2,900

Cash flows from investing activities:


Cash payments for purchase of land (20,000)

Cash flows from financing activities:


Cash received as owner’s investment 25,000
Deduct cash withdrawal by owner (2,000)
Net cash flow from financing activities 23,000
Net cash flow and Nov. 30, 2011 cash balance $ 5,900

51
BOOKKEEPING 03.2

YOU!
THANK

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