UNIT 1 THE ACCOUNTING EQUATION

1 UNIT1 ASSETSTHEACCOUNTINGEQUATIONLIABILITIES= OWNER' a ACCOUNT- a ' theprimaryaccountfortrackingtheinvestede quityofa 'SEQUITYis thenetworthofa +--+ +OWNER' +rewritingtheaccountingequationit shouldbenotedthatAssetsareontheopposites ideoftheequationfromLiabilitiesandOwner' :Thefollowingexamplewillshowonlythecurre nttransactioninformationineachT +OwnerIS ,asophomoreatStateUniversity,startedtheQ uickCleanLaundryServicewitha$ ,paid$ ~ ,purchasedLaundrySuppliesfor$ , ,purchased$48ofLaundryEquipmentpaying$ !.l:i, $ 'SEQUITYSTORAGEACCOUNTSWITHDRAWALSisa storageaccountusedtorecordperiodicdecrea sesinOwner' decreaseinOwner'sEquitycausedbya decreaseinAssets(usuallyCash)oranincreas einLiabilities(SalariesPayable,AccountsP ayable,etc.)

2 ,Advertising, 'sEquitycausedbyanincreaseinAssets(usual lyCashorAccountsReceivable) ,InterestIncome, definitionsin PartVI to the +-= ~.Expense,Revenue,andWithdrawalsaretempo rarystorageaccountsusedtotrackchangesinO wner'sEquityandtheirpositiveornormalbala nceis consistentwiththeeventualchangetobemadei nOwner' ,expensesandwithdrawalsaredebitsbecauset heywilleventuallylowerOwner'sEquity,andR evenueisa creditbecauseit willeventuallyincreaseOwner' ,Expense,andWithdrawalsmayalsobethoughto faschangesinAssetsand/orLiabilitieswhich causeOwner' +OWner' Darinwithdrew$20 for Cashcollectedfor Laundryservicesperformedduringthe monthamountedto $140.

3 $10 was alsodue for servicesrendered.~140 IAccountsReceivable10 ILaundrvRevenueI1509. Paid$75 for the useof washersand dryersfor $5 on On , two studentspaid$10 for nextweek' Paidmonthlyphonebillof $ +OWNER' + +