CHAPTER 1-Cont.

ACCOUNTING
EQUATION
BY
SYAMWIL
Accounting Principles, Tenth Edition

Chapter
1-1
 Study Objectives

1. Explain what accounting equation is.

2. State the accounting equation, and define assets, liabilities,
and owners equity.
3. Analyze the effects of business transactions on the
accounting equation.
4. Understand the four financial statements and how they are
prepared.

Chapter
1-2
 Accounting in Action

The Basic Using the

Basic Financial
Accounting
Accounting Statements
Equation Equation

What is Accounting Equation Transaction Income statement

Assets analysis Owners equity statement
Liabilities Summary of Balance sheet or Financial
transactions Position Statement
Owners equity
Statement of cash flows
Note disclosure
 The Basic Accounting Activities

Owners

Investment Drawings

Payment Borrow
Business Creditors
Customers
Entity
Sell Payment

Buy Payment

Employees
Pertemuan
1- 4
& Supplier
 Accounting Process

Identification Measurement Recording Communication

1. (Prepare
of (Record, accounting
economic (Quantify Classify Report)
events in $ and ) and 2. (Analyze
(Transactions) Summarize) and
Interpret)
The Basic Accounting Equation
The Assets must always Equal to sum of
Creditor (Liabilities) and Ownership claims
(Capital or Owner Equity) against the
business

Asset = Liabilities + Capital

 Forms of Business Ownership

Proprietorship Partnership Corporation

Generally owned Owned by two or Ownership

by one person. more persons. divided into
Often small shares of stock
Often retail and
service-type service-type Separate legal
businesses businesses entity organized
Owner receives under state
Generally
any profits, corporation law
unlimited
suffers any personal liability Limited liability
losses, and is
Partnership
personally liable
agreement
for all debts.
Chapter LO 5 Explain the monetary unit assumption
and the economic entity assumption.
1-7
 Content of The Basic Accounting
Asset
Future economic benefits owned or controlled by a particular
entity as a result of past transaction or events; such as Cash,
Supplies, Equipment, Building etc.

Liabilities
Obligation arising from past transactions of the entity to transfer
assets or services to others entities or individuals in the future;
such as Accounts payable, Notes payable, Salary Payable, etc.

Owners Equity (Capital)

Ownership claim on Net Asset (Asset Liabilities)
Owners Equity Owners Capital, Owners Drawings,
Revenues and Expenses for Proprietorship and Partnership
Owner Equity Ordinary Share or Share Capital, Retained
Earning (Dividend, Revenues and Expenses) for Corporation
Transactions Software or Soft-byte Co started on July 2017
1. Raymond decides to open a computer programming service in campus
communities. On 1 July 2017, he invests $25,000 cash in business, which is named
Software or Soft-byte Co.
2. Computer Equipment is purchased for $10,000 cash on 2 July 2017
3. Soft-byte Co purchases computer paper and others supplies from Acme Supply Co
for $2,800 on 2 July 2017
4. Soft-byte receives $3,600 cash from customer for programming service on 12 July
2017
5. Soft-byte receives a bill $750 from Daily News for the advertising for opening of its
business on 15 July 2017
6. Soft-byte Co provides programming service of $3,800 for customer. Cash
amounting to $1,600 is received from customers, and the balance of $2,200 is
billed to customers on account.
7. Expenses paid in cash for July are store rent, $800, salaries of employees, $1,200,
and utilities, $500.
8. A count of supplies on July 30 indicate that $1,500 of supplies has been used
9. Soft-byte co pays its Daily News advertising bill of $300 in cash.
10. The sum of $1,000 in cash is received from customers who have previously been
billed for services in transaction.
11. Raymond withdraws $1,500 in cash from the business for his personal use.
Intruction; Record the above transaction to Accounting Equation Worksheed and Make
Financial Statement for July 2017?
 Transactions
Transaction 1 Investment by owner
Raymond decides to open a computer programming service in
campus communities. On 1 July 2017, he invests $25,000 cash
in business, which is named Software or Soft-byte Co
Analysis of Transaction 1
This transaction result; Increase in Asset Cash and Owners
Equity (Capital) in equal
SHFT BYTE CO.
Worksheet (Accounting Equation)
Per 1 - 31 July 2017
Asset = Liability + Owner Equity
No Acc. R,
Cash +Rev. -Exp. -R., Drawing Description
= Pay. Capital
1 25.000 = 25.000 Investment
25.000 = - 25.000 - - - Sub Total
= - 25.000 Sub Total
25.000 = 25.000 Total
 Transactions (Cont)
Transaction 2 Purchases of Equipment for Cash
Computer Equipment is purchased for $10,000 cash on 2 July
2017
Analysis of Transaction 2
This transaction result; Increase in Asset Equipment and
Decrease in Asset Cash in equal
SHFT BYTE CO.
Worksheet (Accounting Equation)
Per 1 - 31 July 2017
Asset = Liability + Owner Equity
No Acc. R,
Cash +Equip. +Rev. -Exp. -R., Drawing Description
= Pay. Capital
1 25.000 = 25.000 Investment
2 -10.000 10.000= Equipment
15.000 10.000= 0 25.000 0 0 0Sub Total
= 0 25.000 Sub Total
25.000 = 25.000 Total
 Transactions (Cont)
Transaction 3 Purchases of Supplies on Credit
Soft-byte Co purchases computer paper and others supplies
from Acme Supply Co for $2,800 on 2 July 2017
Analysis of Transaction 3
This transaction result; Increase in Asset Supplies and Increase
in Liabilities Account Payable in equal
SHFT BYTE CO.
Worksheet (Accounting Equation)
Per 1 - 31 July 2017
Asset = Liability + Owner Equity
No Acc. R,
Cash +Suppl. +Equip. +Rev. -Exp. -R., Drawing Description
= Pay. Capital
1 25.000 = 25.000 Investment
2 -10.000 10.000= Equipment
3 2.800 = 2.800 Purchase
15.000 2.800 10.000= 2.800 25.000 0 0 0Sub Total
= 2.800 25.000 Sub Total
27.800 = 27.800 Total
 Transactions (Cont)
Transaction 4 Service rendered for cash
Soft-byte receives $3,600 cash from customer for programming
service on 12 July 2017
Analysis of Transaction 4
This transaction result; Increase in Capital Service Revenue and
increase Asset Cash in equal
SHFT BYTE CO.
Worksheet (Accounting Equation)
Per 1 - 31 July 2017
Asset = Liability + Owner Equity
No Acc. R,
Cash +Suppl. +Equip. +Rev. -Exp. -R., Drawing Description
= Pay. Capital
1 25.000 = 25.000 Investment
2 -10.000 10.000= Equipment
3 2.800 = 2.800 Purchase
4 3.600 = 3.600 Revenue
18.600 2.800 10.000= 2.800 25.000 3.600 0 0Sub Total
= 2.800 28.600 Sub Total
31.400 = 31.400 Total
 Transactions (Cont)
Transaction 5 Purchases on Advertising on Credit
Soft-byte receives a bill $750 from Daily News for the advertising
for opening of its business on 15 July 2017
Analysis of Transaction 5
This transaction result; Increase in Legalities Account Payable
and Decrease Capital Advertising Expense in equal
SHFT BYTE CO.
Worksheet (Accounting Equation)
Per 1 - 31 July 2017
Asset = Liability + Owner Equity
No Acc. R,
Cash +Suppl. +Equip. +Rev. -Exp. -R., Drawing Description
= Pay. Capital
1 25.000 = 25.000 Investment
2 -10.000 10.000= Equipment
3 2.800 = 2.800 Purchase
4 3.600 = 3.600 Revenue
5 = 750 -750 Advertising
18.600 2.800 10.000= 3.550 25.000 3.600 -750 0Sub Total
= 3.550 27.850 Sub Total
31.400 = 31.400 Total
 Transactions (Cont)
Transaction 6 Service rendered for Cash and Credit
Soft-byte Co provides programming service of $3,800 for customer.
Cash amounting to $1,600 is received from customers, and the balance
of $2,200 is billed to customers on account.
Analysis of Transaction 6
This transaction result; in an equal Increase in asset cash and account
receivable and increase in owners equity service revenue.

SHFT BYTE CO.

Worksheet (Accounting Equation)
Per 1 - 31 July 2017
Asset = Liability + Owner Equity
No +Acc. Acc. R,
Cash +Suppl.+Equip. +Rev. -Exp. -R., Drawing Description
Rec. = Pay. Capital
1 25.000 = 25.000 Investment
2-10.000 10.000= Equipment
3 2.800 = 2.800 Purchase
4 3.600 = 3.600 Revenue
5 = 750 -750 Advertising
6 1.600 2.200 = 3.800 Revenue
20.200 2.200 2.800 10.000= 3.550 25.000 7.400 -750 0Sub Total
= 3.550 31.650 Sub Total
35.200 = 35.200 Total
 Transactions (Cont)
Transaction 7 Payment of Expenses
Expenses paid in cash for July are store rent, $800, salaries of
employees, $1.200, and utilities, $500.
Analysis of Transaction 7
This transaction result; decrease in asset cash $2,500 and decrease in
capital in equal for the expenses.
SHFT BYTE CO.
Worksheet (Accounting Equation)
Per 1 - 31 July 2017
Asset = Liability + Owner Equity
No +Acc. Acc. R,
Cash +Suppl. +Equip. +Rev. -Exp. -R., Drawing Description
Rec. = Pay. Capital
1 25.000 = 25.000 Investment
2 -10.000 10.000= Equipment
3 2.800 = 2.800 Purchase
4 3.600 = 3.600 Revenue
5 = 750 -750 Advertising
6 1.600 2.200 = 3.800 Revenue
7 -2.500 = -800 Rent Exp
= -1.200 Salaries Exp
= -500 Utility Exp
17.700 2.200 2.800 10.000= 3.550 25.000 7.400 -3.250 0Sub Total
= 3.550 29.150 Sub Total
32.700 = 32.700 Total
 Transactions (Cont)
Transaction 8 Recognition of Supplies Used; A count of supplies on
July 30 indicate that $1.500 of supplies has been used
Analysis of Transaction; This transaction result; decrease in asset Supply
and decrease in capital in equal for Supplies expenses.

SHFT BYTE CO.

Worksheet (Accounting Equation)
Per 1 - 31 July 2017
Asset = Liability + Owner Equity
No +Acc. Acc. R, -R.,
Cash +Suppl. +Equip. +Rev. -Exp. Description
Rec. = Pay. Capital Drawing
1 25.000 = 25.000 Investment
2 -10.000 10.000= Equipment
3 2.800 = 2.800 Purchase
4 3.600 = 3.600 Revenue
5 = 750 -750 Advertising
6 1.600 2.200 = 3.800 Revenue
7 -2.500 = -800 Rent Exp
= -1.200 Salaries Exp
= -500 Utility Exp
8 -1.500 -1.500 Supplies Exp
17.700 2.200 1.300 10.000= 3.550 25.000 7.400 -4.750 0Sub Total
= 3.550 27.650 Sub Total
31.200 = 31.200 Total
 Transactions (Cont)
Transaction 9 Payment of Accounts Payable
Soft-byte co pays its Daily News advertising bill of $300 in cash.
Analysis of Transaction 9
This transaction result; decrease in asset cash and decrease in
liabilities account payable in equal.
SHFT BYTE CO.
Worksheet (Accounting Equation)
Per 1 - 31 July 2017
Asset = Liability + Owner Equity
No +Acc. +Suppl +Equip Acc. R, -R.,
Cash +Rev. -Exp. Description
Rec. . . = Pay. Capital Drawing
1 25.000 = 25.000 Investment
2-10.000 10.000= Equipment
3 2.800 = 2.800 Purchase
4 3.600 = 3.600 Revenue
5 = 750 -750 Advertising
6 1.600 2.200 = 3.800 Revenue
7 -2.500 = -800 Rent Exp
= -1.200 Salaries Exp
= -500 Utility Exp
8 -1.500 -1.500 Supplies Exp
9 -300 = -300 Acc Payable
17.400 2.200 1.300 10.000= 3.250 25.000 7.400 -4.750 0Sub Total
= 3.250 27.650 Sub Total
30.900 = 30.900 Total
Transactions (Cont)
Transaction 10 Receipt of Cash on account; The sum of $1.000 in cash is
received from customers for billed services in transaction early.
Analysis of Transaction; This transaction result; Does not change total assets, but it
changes the composition of soft-bytes asset. Cash increase $1.000 and accounts
receivable is decreased $1.000.
SHFT BYTE CO.
Worksheet (Accounting Equation)
Per 1 - 31 July 2017
Asset = Liability + Owner Equity
No +Acc. +Suppl +Equip Acc. R, -R.,
Cash +Rev. -Exp. Description
Rec. . . = Pay. Capital Drawing
1 25.000 = 25.000 Investment
2-10.000 10.000= Equipment
3 2.800 = 2.800 Purchase
4 3.600 = 3.600 Revenue
5 = 750 -750 Advertising
6 1.600 2.200 = 3.800 Revenue
7 -2.500 = -800 Rent Exp
= -1.200 Salaries Exp
= -500 Utility Exp
8 -1.500 -1.500 Supplies Exp
9 -300 = -300 Acc Payable
10 1.000 -1.000 = Acc Receivable
18.400 1.200 1.300 10.000= 3.250 25.000 7.400 -4.750 0Sub Total
= 3.250 27.650 Sub Total
30.900 = 30.900 Total
 Transactions (Cont)
Transaction 11 Withdrawal of Cash by Owner
Raymond withdraws $1,500 in cash from the business for his personal
use.
Analysis of Transaction 11
This transaction result; In an equal decrease in assets and owners
equity. Thus, both Cash and Raymend, Capital are decreased $1,500.
 SHFT BYTE CO.
Worksheet (Accounting Equation)
Per 1 - 31 July 2017
Asset = Liability + Owner Equity
No +Acc. +Supp Acc. R, -R,
Cash +Equip. +Rev. -Exp. Description
Rec. l. = Pay. Capital Drawing
1 25.000 = 25.000 Investment
2 -10.000 10.000= Equipment
3 2.800 = 2.800 Purchase
4 3.600 = 3.600 Revenue
5 = 750 -750 Advertising
6 1.600 2.200 = 3.800 Revenue
7 -2.500 = -800 Rent Exp
= -1.200 Salaries Exp
= -500 Utility Exp
8 -1.500 -1.500 Supplies Exp
9 -300 = -300 Acc Payable
10 1.000 -1.000 = Acc Receivable
11 -1.500 = -1.500Drawing
16.900 1.200 1.300 10.000= 3.250 25.000 7.400 -4.750 -1.500Sub Total
= 3.250 26.150 Sub Total
29.400 = 29.400 Total
 Financial Statement
Profit Loss or Income Statement
Owners Equity Statement
Balance Sheet
Cash Flow
Notes (Notes of Financial Statement)
 Financial Statement
Profit Loss Statement or income
statement
It presents the revenues and expenses
and resulting net income or net loss for a
specific period of time
 SOFTBYTE
Income Statement
For the Month Ended July 31, 2017

Revenues
Services revenue $7,400
Expenses
Salaries expense $1.200
Rent expense 800
Supplies expense 1.500
Advertising expense 750
Utilities expense 500
Total expenses -4,750
Net income $2,650
 Financial Statement
Owners Equity Statement or Capital
Statement
It summarizes the changes in owners
equity for a specific period of time
 SOFTBYTE
Owners Equity (Capital) Statement
For the Month Ended July 31, 2017

Raymond, Capital, July 1 $0

Invesment 25.000
25.000
Add: Net income (based on income statement) 2,650
27,650
Less : Drawings -1,500
Raymond, Capital, July 31 $26,150
 Financial Statement
Balance sheet reports the Asset, Liabilities
and owners equity at a specific date
 SOFTBYTE
Balance Sheet
on July 31, 2017
Assets
Cash $16,900
Accounts receivable 1,200
Supplies 1,300
Equipment 10,000
Total assets $29,400
Liabilities and Owners Equity
Liabilities
Accounts payable $3,250
Owners Equity
Raymond, Capital 26,150
Total liabilities and owners equity 29,400
 Cash Flow Statement
Cash Flow summarizes information about
the cash inflows (receipts) and the cash
outflows (payments) for a specific period
of time
Cash flow contains of operating, investing
and financing activities
 SOFTBYTE
Cash Flow
For the Month Ended May 31, 2012

Cash Flow from Operation

Revenues $
Account Receivable
Expenses
Account Payable
Net Operation Cash flow
Cash Flow from Investment
Purchase Equipment
Cash Flow from Financing
Investment by Owners
Drawing by Owners
Net Financing Cash Flow
Net Increase in Cash
Cash at the Beginning of Period
Cash at the End of Period
 Notes of Financial Statement
Its explains all of the account that it needs
to give more detail information to users