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Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner

Chapter 3. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner. $. $. What You’ll Learn How revenue transactions affect the accounting equation. How expense transactions affect the accounting equation.

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Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner

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  1. Chapter 3 Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner $ $ • What You’ll Learn • How revenue transactions affect the accounting equation. • How expense transactions affect the accounting equation. • How withdrawals by the owner affect the accounting equation. $ $

  2. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Why It’s Important The experience you gain by analyzing revenue, expense, and withdrawal transactions will help you analyze transactions in real-world situations. $ $ • Key Terms • revenue • expense • withdrawal $

  3. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Revenue and Expense Transactions $ • Income earned from the sale of goods or services is revenue. • An expense is the price paid for goods or services used to operate a business. $ $

  4. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Revenue Transaction Business Transaction 8 $ Roadrunner received a check for $1,200 from a customer, Sims Corporation, for delivery services. ANALYSISIdentify 1. Roadrunner received cash, so Cash in Bank is affected. The payment received is revenue. Revenue increases owner’s equity, so Maria Sanchez, Capital is also affected. $ $

  5. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Revenue Transaction (cont'd.) Business Transaction 8 (cont'd.) $ Roadrunner received a check for $1,200 from a customer, Sims Corporation, for delivery services. $ ANALYSISClassify 2. Cash in Bank is an asset account. Maria Sanchez, Capital is an owner’s equity account. $

  6. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Revenue Transaction (cont'd.) Business Transaction 8 (cont'd.) $ Roadrunner received a check for $1,200 from a customer, Sims Corporation, for delivery services. $ ANALYSIS + / – 3. Cash in Bank is increased by $1,200. Maria Sanchez, Capital is also increased by $1,200. $

  7. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Revenue Transaction (cont'd.) Business Transaction 8 (cont'd.) Roadrunner received a check for $1,200 from a customer, Sims Corporation, for delivery services. $ ANALYSISBalance 4. The accounting equation remains in balance. $ Assets = Liabilities + Owner’s Equity Cash Accounts Computer Office Delivery Accounts Maria Sanchez, in Bank Receivable Equip. Equip. Equip. Payable Capital Prev. Bal. $21,850 $0 $3,000 $200 $12,000 $11,650 $25,400 Trans. 8+1,200 +1,200 Balance$23,050 + $0 + $3,000 + $200 + $12,000 = $11,650 + $26,600 $

  8. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Expense Transaction Business Transaction 9 $ Roadrunner wrote a check for $700 to pay the rent for the month. $ ANALYSISIdentify 1. Roadrunner pays rent for use of building space. Rent is an expense. Expenses decrease owner’s equity, so the account Maria Sanchez, Capital is affected. The business is paying cash for the use of the building, so Cash in Bankis affected. $

  9. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Expense Transaction (cont'd.) Business Transaction 9 (cont'd.) $ Roadrunner wrote a check for $700 to pay the rent for the month. $ ANALYSISClassify 2. Maria Sanchez, Capital is an owner’s equity account. Cash in Bank is an asset account. $

  10. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Expense Transaction (cont'd.) Business Transaction 9 (cont'd.) $ Roadrunner wrote a check for $700 to pay the rent for the month. $ ANALYSIS + / – 3. Maria Sanchez, Capital is decreased by $700. Cash in Bank is decreased by $700. $

  11. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Expense Transaction (cont'd.) Business Transaction 9 (cont'd.) Roadrunner wrote a check for $700 to pay the rent for the month. $ ANALYSISBalance 4. The accounting equation remains in balance. $ Assets = Liabilities + Owner’s Equity Cash Accounts Computer Office Delivery Accounts Maria Sanchez, in Bank Receivable Equip. Equip. Equip. Payable Capital Prev. Bal. $23,050 $0 $3,000 $200 $12,000 $11,650 $26,600 Trans. 8– 700 – 700 Balance$22,350 + $0 + $3,000 + $200 + $12,000 = $11,650 + $25,900 $

  12. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Withdrawals by the Owner If a business earns revenue, the owner will take cash or other assets from the business for personal use. This transaction is called a withdrawal. $ $ $

  13. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Withdrawals by the Owner (cont'd.) Business Transaction 10 $ Maria Sanchez withdrew $500 from the business for her personal use. $ ANALYSISIdentify 1. A withdrawal decreases the owner’s claim to the assets of the business, so Maria Sanchez, Capital is affected. Cash is paid out, so the Cash in Bank account is affected. $

  14. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Withdrawals by the Owner (cont'd.) Business Transaction 10 (cont'd.) $ Maria Sanchez withdrew $500 from the business for her personal use. $ ANALYSISClassify 2. Maria Sanchez, Capital is an owner’s equity account. Cash in Bank is an asset account. $

  15. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Withdrawals by the Owner (cont'd.) Business Transaction 10 (cont'd.) $ Maria Sanchez withdrew $500 from the business for her personal use. $ ANALYSIS + / – 3. Maria Sanchez, Capital is decreased by $500. Cash in Bank is decreased by $500. $

  16. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Withdrawals by the Owner (cont'd.) Business Transaction 10 (cont'd.) $ Maria Sanchez withdrew $500 from the business for her personal use. ANALYSISBalance 4. The accounting equation remains in balance. $ Assets = Liabilities + Owner’s Equity Cash Accounts Computer Office Delivery Accounts Maria Sanchez, in Bank Receivable Equip. Equip. Equip. Payable Capital Prev. Bal. $22,350 $0 $3,000 $200 $12,000 $11,650 $25,900 Trans. 8– 500 – 500 Balance$21,850 + $0 + $3,000 + $200 + $12,000 = $11,650 + $25,400 $

  17. Section 3 Transactions That Affect Revenue, Expense, and Withdrawals by the Owner (cont'd.) Chapter 3 $ Check Your Understanding $ 1.What effect does revenue have on a business? $ 2.What effect do withdrawals have on a business? $

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