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Cards In This Set
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Accounting Equation
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Assets = Liabilities plus Owner's equityThe equation must remain in balance after each transaction
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Asset
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What a business owns, (cash, supplies, building, cars, etc.), what a business uses to help make money for its organization; things with value like cash or supplies.
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Liabilities
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(debts), what a business owes to creditors(creditors' claims on assets) Ex: Credit card, mortgage, wages payable, accounts payable, notes payable, taxes payable
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Owner's Equity
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Owed to the owner
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A business buys a hundred dollar worth of supplies and charged it.
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100 dollars for the assets and 100 dollars for liabilities
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Left (debt) always has to equal __.
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The right (credit)
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The owner puts some money into the organization, and put a thousand dollars of his own money.
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Cash is going up by a thousand dollars and a thousand dollars in owner's equity.
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Accounts Payable
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Like a credit card, when a business decides to charge something, it is waiting to pay the money
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Owner's equity is affected by four things(W.I.R.E.)
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Withdrawals, if the owner decided that they wanted to go to Vegas, pull out money, that is a personal withdrawal, reduction in the owner's equity, causes owner's equity to go down
Investments that the owner makes, personal investment in the business to help generate or give money to the business when its starting out; causes owner's equity to go up Revenues - when a business generates revenues, selling a product or providing a service, causes owner's equity to go up; causes owner's equity to go up (whose benefiting when the money is money is made by the business - owner) Expenses - costs of doing business; causes owner's equity to go down |
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A business needs money, so the business owner decides to put money so that he can make money. Owner decides to put in a thousand dollars.
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Investment - owner's capital account (record any type of investment that the business receives being the owner). Assets goes up a thousand dollars, and the owner's equity (owner's capital) goes up a thousand dollars.
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The business decides to purchase supplies on account.
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Supplies goes up 300 hundred dollars, and since they charged it they owe a hundred dollars.
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The business has to pay rent. Rent was two hundred dollars.
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Rent is a cost of doing business, and that would be considered an expense. Expenses would be two hundred and the owners equity went down by two hundred. Because we paid it, cash went down by two hundred, owner's equity went down by 200.
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The left of the accounting equation has to equal on the right. Total of cash 8 hundred dollars, plus three hundred dollars of supplies equals 1,100
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Liabilities were 300 hundred dollars, and our owner's capital 1000, but our expenses was 200, equals 800. So 300 plus 800 is 1,100. Which is in balance
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Assets
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Resources owned or controlled by a company; cash, notes receivable, land, buildings, equipment, store supplies, vehicles, accounts receivable
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To Increase a debt you __
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Debit it
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