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Chapter3Analyzing Business TransactionsUsing T AccountsSection 1: Transactions That Affect Assets,Liabilities, and Owner’s EquitySection Objectives1.Set up T accounts for assets, liabilities,and owner’s equity.2.Analyze business transactions and enterthem in the accounts.Determine the balance of an account.3.McGraw-Hill 2007 The McGraw-Hill Companies, Inc. All rights reserved.
Asset, Liability, and Owner’s EquityAccounts3-3
The Accounting EquationASSETSThe property abusiness ownsLIABILITIES The debts ofthe business OWNER’SEQUITYThe owner’s financialinterest in the business3-4
QUESTION:What are accounts?ANSWER:Accounts are written records of theassets, liabilities, and owner’sequity of a business.3-5
Advantages of AccountsAccounts help to: analyze, record, classify, summarize, and report financial information.3-6
QUESTION:What is classification?ANSWER:Classification is a means ofidentifying each account as anasset, liability, or owner’s equity.3-7
Classification of Accounts Asset AccountsAsset accounts show the property a businessowns. Liability AccountsLiability accounts show the debts of thebusiness. Owner’s Equity AccountsOwner’s equity accounts show the owner’sfinancial interest in the business.3-8
QUESTION:What is a T-account?ANSWER:A T account is a type of account,resembling a T, used to analyze theeffects of a business transaction.3-9
T AccountsASSETS LIABILITIES OWNER’S EQUITY RecordIncreasesRecordDecreasesRecordDecreases RecordIncreasesRecordDecreases RecordIncreasesLEFT SIDERIGHT SIDELEFT SIDERIGHT SIDELEFT SIDERIGHT SIDE3-10
Objective 1Set up T accounts for assets,liabilities, and owner’s equity.3-11
Recording a Cash Investment3-12
Cash Account Cash is an asset. Assets appear on the left side of the accounting equation. Cash increases appear on the left side of the Cash T account. Decreases are shown on the right side.Cash RecordIncreasesRecordDecreasesLEFT SIDERIGHT SIDE3-13
Capital Account Capital is an owner’s equity account. Owner’s equity appears on the right side of theaccounting equation (Assets Liabilities Owner’s Equity). Increases appear on the right side of the T account. Decreases appear on the left side.Jason Taylor, Capital3-14RecordDecreases RecordIncreasesLEFT SIDERIGHT SIDE
Thank Youfor usingCollege Accounting, 11’th EditionPrice Haddock Brock3-15
Analyzing Business Transactions Using T Accounts Section 1: Transactions That Affect Assets, Liabilities, and Owner's Equity Chapter 3 Section Objectives 1. Set up T accounts for assets, liabilities, and owner's equity. 2. Analyze business transactions and enter them in the accounts. 3. Determine the balance of an account.
