Changes that Affect Owner’s Equity

Chapter 2

Changes that affect OE

Revenue◦Sales◦Sales on Account

Expenses

Revenue Transaction

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

Sold Services on Account 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

Paid Cash for Expense

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 to owner for personal use

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