Unit 5
Accounting and Finance Foundations Unit 5: Accounting Terminology 335
Accounting Terminology
Chapter 14
Assets = Liabilities + Owner’s Equity
Trans.
No.
Cash + Supplies + Accounts
Receivable,
Lisa Cook
+ Prepaid
Insurance
= Accounts
Payable
Office
Supply
+ Your
Name,
Capital
+ Rev. - Expenses - Drawing
- 7500 + + + = + 7500 + - -
- -300
7200
+ +300 + + = + 7500 + - -
- -550
6650
+ 300 + + +550 = + 7500 + - -
- 6650 + +450
750
+ + 550 = +450 + 7500 + - -
- -200
6450
+ 750 + + 550 = -200
250
+ 7500 + - -
Transaction 5
Paid cash on account, Office Company, $200
When a company uses cash to pay an account to which a charge was made, in this situation, Office
Company, the accounts affected are Cash and the liability (Office Company). Cash is classified as an asset,
and Office Company is a liability, because you now owe them money. When a company pays on a liability,
the amount owed to the company is decreased. When you pay cash, the amount the company has in cash
decreases.
Student Guide