The Accounting Equation

Resources

What are an organizations resources called?

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The Accounting Equation

Resources = Sources

Assets

Cost of resources used in the business

What are the sources of the assets?

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The Accounting Equation

Resources = Sources

Liabilities Assets Owners Equity

Resources supplied by creditors and owners

Cost of resources used in the business

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Business Transactions
a. Chris Clark deposits $25,000 in a bank account for NetSolutions.
ASSETS LIABILITIES

OWNERS EQUITY

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Business Transactions
a. Chris Clark deposits $25,000 in a bank account for NetSolutions.
ASSETS LIABILITIES

Cash 25,000

OWNERS EQUITY

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Business Transactions
a. Chris Clark deposits $25,000 in a bank account for NetSolutions.
ASSETS LIABILITIES

Cash 25,000

OWNERS EQUITY

Chris Clark, Capital 25,000

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Business Transactions
b. NetSolutions buys land for $20,000.

ASSETS

LIABILITIES

OWNERS EQUITY

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Business Transactions
b. NetSolutions buys land for $20,000.

ASSETS

LIABILITIES

Cash (20,000)

OWNERS EQUITY

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Business Transactions
b. NetSolutions buys land for $20,000.

ASSETS

LIABILITIES

Cash (20,000) Land 20,000

OWNERS EQUITY

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Business Transactions
c. NetSolutions buys supplies for $1,350, agreeing to pay the supplier in the near future.
ASSETS LIABILITIES

OWNERS EQUITY

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Business Transactions
c. NetSolutions buys supplies for $1,350, agreeing to pay the supplier in the near future.
ASSETS LIABILITIES

Supplies 1,350

OWNERS EQUITY

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Business Transactions
c. NetSolutions buys supplies for $1,350, agreeing to pay the supplier in the near future.
ASSETS LIABILITIES

Supplies 1,350

Accounts Payable 1,350

OWNERS EQUITY

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Business Transactions
d. NetSolutions earns fees of $7,500, receiving cash.

ASSETS

LIABILITIES

OWNERS EQUITY

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Business Transactions
d. NetSolutions earns fees of $7,500, receiving cash.

ASSETS

LIABILITIES

Cash 7,500

OWNERS EQUITY

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Business Transactions
d. NetSolutions earns fees of $7,500, receiving cash.

ASSETS

LIABILITIES

Cash 7,500

OWNERS EQUITY

Fees Earned 7,500

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Business Transactions
e. NetSolutions paid: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275.
ASSETS LIABILITIES

OWNERS EQUITY

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Business Transactions
e. NetSolutions paid: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275.
ASSETS LIABILITIES

Cash (3,650)

OWNERS EQUITY

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Business Transactions
e. NetSolutions paid: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275.
ASSETS LIABILITIES

Cash (3,650)

OWNERS EQUITY

Expenses (3,650)

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Business Transactions
f. NetSolutions pays $950 to creditors on account.

ASSETS

LIABILITIES

OWNERS EQUITY

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Business Transactions
f. NetSolutions pays $950 to creditors on account.

ASSETS

LIABILITIES

Cash (950)

OWNERS EQUITY

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Business Transactions
f. NetSolutions pays $950 to creditors on account.

ASSETS

LIABILITIES

Accounts Payable (950) Cash (950)

OWNERS EQUITY

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Business Transactions
g. At the end of the month, the cost of supplies on hand is $550.
ASSETS LIABILITIES

OWNERS EQUITY

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Business Transactions
g. At the end of the month, the cost of supplies on hand is $550.
ASSETS LIABILITIES

Supplies (800)

OWNERS EQUITY

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Business Transactions
g. At the end of the month, the cost of supplies on hand is $550.
ASSETS LIABILITIES

Supplies (800)

OWNERS EQUITY

Supplies Expense (800)

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Business Transactions
h. Chris Clark withdraws $2,000 in cash.
ASSETS LIABILITIES

OWNERS EQUITY

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Business Transactions
h. Chris Clark withdraws $2,000 in cash.
ASSETS LIABILITIES

Cash (2,000)

OWNERS EQUITY

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Business Transactions
h. Chris Clark withdraws $2,000 in cash.
ASSETS LIABILITIES

Cash (2,000)

OWNERS EQUITY

Chris Clark, Drawing (2,000)

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Transaction Summary
ASSETS
LIABILITIES

Cash Supplies Land

5,900 550 20,000

OWNERS EQUITY

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Transaction Summary
ASSETS
LIABILITIES Accts. Payable 400

Cash Supplies Land

5,900 550 20,000

OWNERS EQUITY

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Transaction Summary
ASSETS
LIABILITIES Accts. Payable 400

Cash Supplies Land

5,900 550 20,000

OWNERS EQUITY C. Clark, Capital 25,000 C. Clark, Drawing (2,000) Fees Earned 7,500 Wages Expense (2,125) Rent Expense (800) Supplies Expense (800) Utilities Expense (450) Misc. Expense (275)

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Effects of Transactions on Owners Equity

OWNERS EQUITY

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Effects of Transactions on Owners Equity

OWNERS EQUITY decreased by

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Effects of Transactions on Owners Equity

OWNERS EQUITY decreased by

Owners withdrawals

Expenses

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Effects of Transactions on Owners Equity

OWNERS EQUITY increased by

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Effects of Transactions on Owners Equity

OWNERS EQUITY increased by

Owners investments Revenues

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Effects of Transactions on Owners Equity

OWNERS EQUITY decreased by increased by

Owners withdrawals

Owners investments Revenues

Expenses

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Effects of Transactions on Owners Equity

OWNERS EQUITY decreased by increased by

Owners withdrawals

Owners investments Revenues

Expenses

NET INCOME

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Financial Statements
NetSolutions Income Statement For the Month Ended November 30, 2002 Fees earned Operating expenses: Wages expense Rent expense Supplies expense Utilities expense Miscellaneous expense Total operating expenses Net income $7,500 $2,125 800 800 450 275 4,450 $3,050

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Financial Statements
NetSolutions Income Statement For the Month Ended November 30, 2002 Fees earned Operating expenses: Wages expense Rent expense Supplies expense Utilities expense Miscellaneous expense Total operating expenses Net income $7,500 $2,125 800 800 450 275 4,450 $3,050

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Financial Statements
NetSolutions Income Statement For the Month Ended November 30, 2002 Fees earned Operating expenses: Wages expense Rent expense Supplies expense Utilities expense Miscellaneous expense Total operating expenses Net income $7,500 $2,125 800 800 450 275 4,450 $3,050

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Financial Statements
NetSolutions Income Statement For the Month Ended November 30, 2002 Fees earned Operating expenses: Wages expense Rent expense Supplies expense Utilities expense Miscellaneous expense Total operating expenses Net income $7,500 $2,125 800 800 450 275 4,450 $3,050

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Financial Statements
NetSolutions Statement of Owners Equity For the Month Ended November 30, 2002 Chris Clark, capital, November 1, 2002 $ 0 Investment on November 1, 2002 $25,000 Net income for November 3,050 $28,050 Less withdrawals 2,000 Increase in owners equity 26,050 Chris Clark, capital, November 30, 2002 $26,050

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Financial Statements
NetSolutions Statement of Owners Equity For the Month Ended November 30, 2002 Chris Clark, capital, November 1, 2002 $ 0 Investment on November 1, 2002 $25,000 Net income for November 3,050 $28,050 Less withdrawals 2,000 Increase in owners equity 26,050 Chris Clark, capital, November 30, 2002 $26,050

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Financial Statements
NetSolutions Statement of Owners Equity For the Month Ended November 30, 2002 Chris Clark, capital, November 1, 2002 $ 0 Investment on November 1, 2002 $25,000 Net income for November 3,050 $28,050 Less withdrawals 2,000 Increase in owners equity 26,050 Chris Clark, capital, November 30, 2002 $26,050

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Financial Statements
NetSolutions Statement of Owners Equity For the Month Ended November 30, 2002 Chris Clark, capital, November 1, 2002 $ 0 Investment on November 1, 2002 $25,000 Net income for November 3,050 $28,050 Less withdrawals 2,000 Increase in owners equity 26,050 Chris Clark, capital, November 30, 2002 $26,050

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Financial Statements
NetSolutions Statement of Owners Equity For the Month Ended November 30, 2002 Chris Clark, capital, November 1, 2002 $ 0 Investment on November 1, 2002 $25,000 Net income for November 3,050 $28,050 Less withdrawals 2,000 Increase in owners equity 26,050 Chris Clark, capital, November 30, 2002 $26,050

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Financial Statements
NetSolutions Balance Sheet November 30, 2002 Assets

Cash Supplies Land Total assets Liabilities Accounts payable Owners Equity Chris Clark, capital Total liabilities and owners equity

$5,900 550 20,000

$26,450 $ 400 26,050 $26,450

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Financial Statements
NetSolutions Balance Sheet November 30, 2002 Assets

Cash Supplies Land Total assets Liabilities Accounts payable Owners Equity Chris Clark, capital Total liabilities and owners equity

$5,900 550 20,000

$26,450 $ 400 26,050 $26,450

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Financial Statements
NetSolutions Balance Sheet November 30, 2002 Assets

Cash Supplies Land Total assets Liabilities Accounts payable Owners Equity Chris Clark, capital Total liabilities and owners equity

$5,900 550 20,000

$26,450 $ 400 26,050 $26,450

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Financial Statements
NetSolutions Balance Sheet November 30, 2002 Assets

Cash Supplies Land Total assets Liabilities Accounts payable Owners Equity Chris Clark, capital Total liabilities and owners equity

$5,900 550 20,000

$26,450 $ 400 26,050 $26,450

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Financial Statements
NetSolutions Statement of Cash Flows For the Month Ended November 30, 2002 Cash flows from operating activities: Cash received from customers $ 7,500 Deduct cash payments for expenses and payments to creditors 4,600 Net cash flow from operating activities Cash flows from investing activities: Cash payments for acquisition of land Cash flows from financing activities: Cash received as owners investment $25,000 Deduct cash withdrawal by owner 2,000 Net cash flow from financing activities Net cash flow and Nov. 30, 2002 cash balance

$ 2,900

(20,000)

23,000 $5,900

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Financial Statements
NetSolutions Statement of Cash Flows For the Month Ended November 30, 2002 Cash flows from operating activities: Cash received from customers $ 7,500 Deduct cash payments for expenses and payments to creditors 4,600 Net cash flow from operating activities Cash flows from investing activities: Cash payments for acquisition of land Cash flows from financing activities: Cash received as owners investment $25,000 Deduct cash withdrawal by owner 2,000 Net cash flow from financing activities Net cash flow and Nov. 30, 2002 cash balance

$ 2,900

(20,000 )

23,000 $5,900

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Financial Statements
NetSolutions Statement of Cash Flows For the Month Ended November 30, 2002 Cash flows from operating activities: Cash received from customers $ 7,500 Deduct cash payments for expenses and payments to creditors 4,600 Net cash flow from operating activities Cash flows from investing activities: Cash payments for acquisition of land Cash flows from financing activities: Cash received as owners investment $25,000 Deduct cash withdrawal by owner 2,000 Net cash flow from financing activities Net cash flow and Nov. 30, 2002 cash balance

$ 2,900 ) (20,000)

23,000 $5,900

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Financial Statements
NetSolutions Statement of Cash Flows For the Month Ended November 30, 2002 Cash flows from operating activities: Cash received from customers $ 7,500 Deduct cash payments for expenses and payments to creditors 4,600 Net cash flow from operating activities Cash flows from investing activities: Cash payments for acquisition of land Cash flows from financing activities: Cash received as owners investment $25,000 Deduct cash withdrawal by owner 2,000 Net cash flow from financing activities Net cash flow and Nov. 30, 2002 cash balance

$ 2,900

(20,000 )

23,000 $5,900

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