Accounting and Finance Foundations

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

1. 7500 + + + = + 7500 + - -


2. -300
   7200

+ +300 + + = + 7500 + - -

3. -550
   6650

+ 300 + + +550 = + 7500 + - -

4. 6650 + +450
   750

+ + 550 = +450 + 7500 + - -

5. -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