lecture notes

Learning Objectives LESSON 2-2 Analyzing How Transactions Affect Accounts LO4 Restate and apply the four questions necessary to analyze transactions for starting a business into debit and credit parts. Chart of Accounts Each transaction changes the balances of at least two accounts. A list of accounts used by a business is called a chart of accounts. SLIDE 2 Lesson 2-2 Chart of Accounts for Delgado Web Services Balance Sheet Accounts (100) ASSETS 110 Cash 120 Petty Cash 130 Accounts Receivable—Main Street Services 140 Accounts Receivable—Valley Landscaping 150 Supplies 160 Prepaid Insurance (200) LIABILITIES 210 Accounts Payable—Canyon Office Supplies 220 Accounts Payable—Mountain Graphic Arts (300) OWNER’S EQUITY 310 Michael Delgado, Capital 320 Michael Delgado, Drawing 330 Income Summary Income Statement Accounts (400) REVENUE 410 Sales (500) EXPENSES 510 Advertising Expense 520 Cash Short and Over 530 Communications Expense 540 Equipment Rental Expense 550 Insurance Expense 560 Miscellaneous Expense 570 Supplies Expense SLIDE 3 Lesson 2-2 Received Cash from Owner as an Investment January 2. Received cash from owner as an investment, $2,000.00. Cash and Michael Delgado, Capital are affected. 1 2 Cash is an asset account. Owner’s Equity is increased. 3 Michael Delgado, Capital is credited. 4 Cash is debited. 4 Michael Delgado, Capital is an owner‘s equity account. 2 Assets are increased. 3 LO4 SLIDE 4 Lesson 2-2 Paid Cash for Supplies January 2. Paid cash for supplies, $165.00. Supplies and Cash are affected. 1 2 Supplies and Cash are assets. Assets (Cash) are decreased. 3 Cash is credited. 4 Assets (Supplies) are increased. 3 Supplies is debited. 4 LO4 SLIDE 5 Lesson 2-2 Paid Cash for Insurance January 3. Paid cash for insurance, $900.00. Prepaid Insurance and Cash are affected. 1 2 Prepaid Insurance and Cash are assets. Assets (Cash) are decreased. 3 Cash is credited. 4 Assets (Prepaid Insurance) are increased. 3 Prepaid Insurance is debited. 4 LO4 SLIDE 6 Lesson 2-2 Bought Supplies on Account January 5. Bought supplies on account from Canyon Office Supplies, $220.00. Supplies and Accounts Payable—Canyon Office Supplies are affected. 1 2 Supplies is an asset. Liabilities are increased. 3 Accounts Payable— Canyon Office Supplies is credited. 4 Supplies is debited. 4 Accounts Payable— Canyon Office Supplies is a liability. 2 Assets are increased. 3 LO4 SLIDE 7 Lesson 2-2 Paid Cash on Account January 9. Paid cash on account to Canyon Office Supplies, $100.00. Accounts Payable—Canyon Office Supplies and Cash are affected. 1 2 Cash is an asset. Liabilities are decreased. 3 Accounts Payable— Canyon Office Supplies is debited. 4 Cash is credited. 4 Accounts Payable— Canyon Office Supplies is a liability. 2 Assets are decreased. 3 LO4 SLIDE 8 Lesson 2-2 Lesson 2-2 Audit Your Understanding 1. State the four questions used to analyze a transaction. ANSWER 1. Which accounts are affected? 2. How is each account classified? 3. How is each classification changed? 4. How is each amount entered in the accounts? SLIDE 9 Lesson 2-2 Lesson 2-2 Audit Your Understanding 2. What two accounts are affected when a business buys supplies on account? ANSWER Supplies Accounts Payable SLIDE 10 Lesson 2-2