Accounting 1: Program #3 – “Transaction Analysis”

Hi we are back this is lecture number 3
I believe so we are relocating right along. So thanks for being below today for you
individuals viewing at home, and for you individuals below one-on-one. I was slowly overcoming my cool so for the
thank you for the flowers and also the obtain will certainly cards that have been sent my method I will certainly draw
through this point, and I do value your well dreams. For you individuals in the house what we simply did right here
for the face to facers was what we simply took a quiz, and also obviously I can'' t give you the quiz in the house. The quiz that I offered why put on ' t you reveal this on the display, and also if you ' re in the house why don ' t you just stop it, and also see exactly how
well you would certainly do on this quiz simply stop it, and also when you'' re done taking that test in a manner of speaking simply start it up once more as well as you can go over the solutions. So we will certainly look at the answers right now. Let'' s switch it over and I'' ll just what is the bookkeeping formula possessions equates to obligations plus owner'' s equity or equity right.Assets equivalent liabilities plus proprietor'' s equity and that constantly has to stay in balanced for a company at any type of offered time the
assets have to equal the obligations plus the proprietor'' s equity. What makes equity boost? Investments of properties by the proprietor into the service, and earnings right, investments of properties by the proprietor into the organization, and profits are both points that create proprietor'' s equity to boost. Both things that create it lower are simply the flip side of that. Withdrawals of possessions by the proprietors out of business, as well as costs so I desire you to have those facts actual securely sealed right into your minds, because it'' s mosting likely to assist us, and especially today ok this is a truly vital lecture so I ' m happy you ' re viewing it.One thing I desired to advise you all of and especially for you folks in the house but even for you face to facers is you can constantly re-watch These I recognize you enjoyed them the first time the second time they'' re also much better. So if you'' re ever before battling with a principle sometimes if you see it a second time it'' s mosting likely to become a lot much more clear so put on'' t. hesitate to do that, that'' s one of the benefits of teaching in this kind of manner. Alright, prior to we review the research I'' m. mosting likely to clarify something real quick. I'' m going to try to alter my verbage a little.
bit to ensure that it'' s not as complicated. The attach the connect assignments, the amount of.
people have registered on attach? A lot of you there'' s a pair that still sanctuary ' t. we spoke about that prior to course in your home I desire you to register for connect and once more.
most likely to the lessons tab go to the lessons tab on angel as well as you ought to see something there.
that refers to the URL and also the information for research connect.But I want to start

not calling it connect. research I ' m going to try my finest and you can fix me I want to call it the connect.
jobs ok. So when I talk concerning you require to do your connect.
job I'' m not going to state connect homework I'' m truly not going to attempt to do that'I ' m. mosting likely to claim connect tasks, due to the fact that the research is like what I appoint at the.
end of the hr or completion of the lecture each time and also then we look at it like what.
we'' re ready to do.'I wear ' t want you to getting you confused. you see what I ' m saying? When I talk about doing your homework that'' s. what I assign I generally put it up on the screen right prior to you leave you do it pencil as well as.
paper, book, use your job papers perhaps in the rear of your book, as well as then we discuss.
it that'' s the homework.Connect jobs are something entirely. different as well as we actually do not look at the attach jobs in course. They provide you feedback on the computer system make. sense ok? Allow ' s look at the research that I
designated. I put on ' t assume it was actual mind blowing research'was it? Let ' s go over fast research study one-eight young boy. that was a toughie wasn ' t it? Did you draw an all nighter on'that? Ok we understand that possessions have to equivalent liability. plus equity so for business one on quick study one-eight on web page thirty-one what do obligations. equal ten-thousand dollars. On business two what do assets equal eighty. thousand bucks? Company three what does equity equal? Also eighty-thousand dollars right ok good.Quick study one-seven complete properties of Caldwell.

Company equates to forty thousand, and its equity is ten thousand so what its obligations thirty. thousand once more assets need to equivalent obligations plus owner ' s equity. B total assets of water world equal fifty'. 5 thousand and also its liability and also its equity quantities are equivalent to each other. Just how much are its liabilities so just how much. are its liabilities twenty seven five just how much is its equity twenty 7 5 same. Alright so any concerns on those two? Okay I think the various other one I offered you is workout. one-seven is that correct? And this remains in pertains to of to the various.
sorts of ways you can organize your organization. They desire us to figure out from the summary. if it ' s a sole-proprietorship, a collaboration, or a firm.
And when I review these I ' ll emphasize in the. phrasing what the giveaway was in wherefore type of what organization it is.
A-one pays its very own revenue taxes and also has two. owners it ' s a corporation a firm pays its own earnings taxes.B possession of Zeller Company is divided right into. a thousand shares of supply it is a company, companies have supply we didn ' t speak about. that, however it was in your publication so I desire you to be reading'your publication as well. C Waldren is had by Mary Malone as well as she. is personally accountable for the firm ' s financial debts, sole-proprietorships one owner she ' s directly. responsible sole-proprietorships. D Mike Douglas and also Nathan Logan own'monetary.
E Baily and Kay very own squeaky clean a cleaning.
If that as well if that were a choice ok good.Are we on F? Plasto products does not pay earnings tax and. It is a sole-proprietorship.
What I want to do currently I ' m going to offer you. As well as if I ' m ever writing and
you can ' t see. You went right into to the financial institution they lent when.
is still well balanced ok now allow ' s say keeping that new money let ' s say we bought a one thousand. dollar photo photocopier a piece of equipment well just how will certainly that result this accounting.
Well our cash which is a possession would go down. Not an expense, because it ' s a set property.
One property our money goes down by a thousand. assume regarding that you provided a thousand so you have a thousand dollars much less cash money than. Yet you likewise have this brand-new large item of equipment cash money goes when you entered the shop. down tools increases recalling at that does every little thing stay in balance is the audit. formula still in balance
. We didn ' t do anything on this side however then. that impact was absolutely no over below best every little thing stays in equilibrium that ' s a little preview of.
what we ' re mosting likely to talk regarding today, however before we do.I want to most likely to a slide right here as well as the slide. is right here there are specific principles and assumptions of accounting and also all the.
policies of'audit are kind of based on these concepts as well as assumptions ok now we ' re not.
mosting likely to experience those all today, yet we are going to experience the revenue acknowledgment.
The profits recognition concept ok, what. Well that states that we ' re going to acknowledge. We identify profits when it is earned when.
Jessica let ' s state you ' re my client and also allows. Let ' s simply make the deal of course
five5 Allow ' s get an excellent side shot from the camera.I want to get a great side shot ok I ' ve given.
and she says well I tell you what I ' m mosting likely to give you the 5 bucks ideal and also I go.
“of course she goes I ' m going” to give you the 5 bucks today, as well as can you just bring it to.
me on Monday.I claim no problem and she provides me the 5. bucks now can I acknowledge this as earnings? No I can
not, currently this strikes some people. as odd now she ' s a client I ' m a business she just provided me 5 dollars

, as well as I can not.
recognize that as earnings, because it is not yet earned I haven ' t given her the calculator.
She'provides me five dollars and the way I. actually tape this on my books is as unearned revenue which is a liability, due to the fact that what. do I owe her? I either owe her refund or a calculator. .
Going back to that instance she offer me. five dollars ok the weekend reoccurs I claim hello its Monday I have I obtained that calculator. for you Jessica she goes great I can ' t wait to get it ok.
So hold your distribute such as this I still have. not made the income, I have actually not gained the revenue, I have currently gained the earnings. When we recognize the profits it ' s all, it does not demand cash is not the impetuous for. when I offer you that calculator cool.Let '
s do another of these I placed the 5. dollars in my pocket, as well as I lost it'in there another of this let ' s rewind, and start

this. whole point over she claims hey I want to purchase one of those calculator from you as well as I say. oh they ' re great you ' re going to really like them they ' re five bucks, and she says I. tell you what I put on ' t have the cash right now for it as well as she goes can I just pay'you. the cash for it on Monday and also I say'that ' s not a problem she goes
I really need it today. for the rest of my classes so I go on and give you the calculator I have made the. income currently has she paid me for it no doesn ' t issue I can acknowledge the earnings, because.
it is earned I have actually given her the service or product I now have on my publications what is.
called a balance dues I have a receivable from Jessica, due to the fact that I ' m mosting likely to obtain. money in the future however I can as well as will certainly acknowledge that as profits ok really important.The weekend break comes as well as goes its Monday as well as. say hi there how ' s that calculator going as well as she claims it might be the very best calculator

I ' ve ever before. had in my entire life and also I
say do you have the 5 bucks you owe me? As well as she claims indeed as well as she give me the 5. dollar currently do I recognize this as income no I already recognized it as revenue you. see what I ' m saying I don ' t recognize profits again I acknowledged it when I gave her the. services or product so all I'do at this moment is my receivable goes down and my cash goes. up.There ' s no earnings acknowledge when she pays. When I give the item or service and also this can take place, me the revenue is all based on. similarly if I were a landscaping company and I was trimming your yard for fifty dollars I would. identify the earnings as soon I was done cutting your lawn regardless of when you paid me for. it. There are specific firms and services. that are known for you
pay cash prior to you obtain the service as an example the amount of. of you drive an automobile a lot of you I hope you all have car insurance coverage right you have to pre-pay. your vehicle insurance coverage right well the insurer gets all this cash in, yet they have.
Let ' s state you pay twelve hundred dollars. Jessica for 6 months of automobile insurance ok well they get that twelve hundred dollars.
identify 2 hundred dollars of that right, due to the fact that they gave that solution right,.
does'that make good sense? Various other companies that typically have cash before. they supply product and services a publication subscription let ' s say you have actually paid twenty.
4 bucks for twelve problems for visitor ' s absorb magazine well they have the cash,. They place ' t provided the product yet have they? When they send out that terrific, every month. publication they can identify several of that as revenue.The last example would be
like a rock show. ok. A few years ago I paid cash for a Bruce Springsteen. concert below in community did you pay for that as well? You understand where this depressing story going put on ' t. you? I was

so fired up to see Bruce Springsteen,.
and also if you ' re seeing Bruce you really let
me down ok. Yet any type of method I turned up to the concert and. it was terminated now I obtained my refund,
because Bruce and the E-Street band had not.
offered me'an item or solution right.Think of all that cash that Bruce entered. When is it gained as quickly as he ' s done with the show does that make, was it earned no. feeling? One last time we acknowledge earnings when. it is made when is it made

? When the product or service has been supplied.
okay cool. Alright, so currently what I want to do is return.'to this bookkeeping equation currently there is the
standard accounting equation proper properties amounts to.
obligations plus equity now from our quiz both things that triggered equity to reduce.
were what? Withdraws of possessions by the owner out of the.
Equity is lowered by costs and proprietor. Withdrawals.
Allow me get my tip going right here so as these.
things raise as these points boost equity actually lowers, since they ' re deducted. does that make feeling? As withdrawals raise proprietor ' s equity reduction. because it ' s subtracted, as costs increase owner ' s equity decreases, because expenses. are deducted. Earnings as well as financial investments by the owner into. business which we keep
track in the capital account as those increase proprietor'' s equity boosts,. I desire you to be mindful of these minus indicators below because for those products when they. increase owners ' equity decreases, does that make good sense? Currently what I desire to do is something really. crucial as well as it is mosting likely to be you can result that for a second we are going to analyze. some transactions right here and also this of those first skills that
I want you to master you. need to master this before we take place to the following ability which we ' ll discover in chapter two.So this real crucial so if you have to rewatch. this section a time or 2 that ' s great yet I desire you to have this down we ' re going to. examine deals.
Going to the screen we know that the accounting. equation must, must, should continue to be in equilibrium after every purchase that we analyze so. allow ' s go through a few of these where does this beginning it starts right here so'let ' s say. Jay Scott spends twenty thousand dollars money to start business perhaps it was a. inheritance from his grandfather or something, however he has twenty thousand dollars as well as he.
One of those thing that increases proprietor ' s equity. As well as owner ' s equity as well as capital we kind of. Allow ' s look at one more purchase allowed ' s state.
Believe about it you go to workplace depot with. Exactly how
does that look appearance this analysis? Well cash goes down as well as those parenthesis.
are you with me? Currently sometimes people assume something has to.
happen on each side of the equal sign ok the left side and the best side no nothing took place.
over on the appropriate side of this equation absolutely nothing took place over below did it? It is all over here it is all over right here it. is all on the left
side however that has a no internet result so the accounting equation stays. in balance doesn ' t it? Recognize what we ' re doing? Does the audit formula remain in balance? Yes.Let ' s consider another transaction this time around. we bought devices, devices is simply not upload it keeps in mind, as well as pencils however it ' s something. big such as this big expensive picture copier. We purchased equipment for fifteen thousand
. dollars cash the very first question you ask are what are the accounts effected.
Well cash decreases'by fifteen thousand as well as. your account called equipment has actually just increased by fifteen thousand right.

As soon as again currently provides, those are both properties.
aren ' t the very same point as devices ok so when we take a look at it'in the analysis this is just how. it ' s mosting likely to look your cash money has actually decreased by fifteen thousand bucks, and also your tools. has increased by fifteen thousand bucks ok Marlen. Given that the owner has business when he.
places that coipy machine right into the business why wouldhnt proprietors equity rise too given that.That'' s a fantastic inquiry let me repeat that inquiry what'he ' s claiming is since the owner has this possession and the company is going right into the service why doesn'' t that boost his equity that ' s a fantastic concern, due to the fact that. it seems to oppose the test I'' ll tell you why.Look back

at the screen it'' s the company. When he put this money in his owner, the services money that purchased the tools assume concerning. funding increased he can'' t simply utilize that cash money to maintain buying properties and maintain running up.
his equity you see what I'' m claiming? So In a manner the owner did not purchase directly.
that copy machine it was business that bought it, does that make good sense excellent.
question exceptional question.Alright number 4 allowed

' s take a look at another. transaction this moment the proprietor purchased products of 2 hundred bucks and also devices. of a thousand dollars on
account, and also I claimed the proprietor but I actually meant the business. the business purchased products of 2 hundred dollars and also tools of a thousand dollars. on account. What does it mean on account? Occasionally that called on credit scores that implies.
What accounts are influenced? Well assume regarding it materials are going to.
rise by 2 hundred bucks equipment is going to increase by a thousand dollars as well as our.
Well let'' s take a look materials goes up by. Accounts payable goes down or the unfavorable no accounts payable goes up. Your car loans go down you pay them off.
So take a look at that products goes up by. 2 hundred equipment goes up by one thousand accounts payable increases by twelve hundred. bucks, you with me? Is accounts payable considered the liability. or equity? Good concern accounts payable is a liability. alright accounts payable is a liability in fact returning to the display right here if I. have my reminder here the obligations more than here the equity is over here
ok.Now have a look at that once again I wish to present. an idea to you called what is called dual entry audit what that means is that every.
purchase has to affect a minimum of two accounts or else you can ' t keep in balance so every.
among these deals these initial 4 that we ' ve examined at the very least'two accounts.
Now in purchase four there were three accounts. Double access bookkeeping simply states that at. In order for the audit equation to.
It is isn
' t it? I ' ll circle this you can figure up what
the ending balances are just simply adding including ' s. above over you can figure this all out and verify validate assets truly absolutely equal equivalentResponsibilities Allow ' s say we borrowed

4 thousand dollars.
bucks as well as a particular obligation would go up by four thousand bucks but it would certainly be accounts. payable this would certainly be note payable. Now what ' s the distinction in between notes payable. and also accounts payable? Notes payable are extra official they ' re written.
down on a note as well as there ' s usually passion involved.
When you purchase, accounts payable is just like. some workplace supplies as well as you state I ' ll pay you at the end of the month as well as they state ok. you ' ve shopped here for fifteen years we understand you ' re great for it ok.
'a note payable how several below have a pupil. anybody right here have student finances? Anybody right here have a vehicle loan? Any person below have a mortgage well if you have. any one of those you have to authorize things as well as they gave you a rates of interest those were notes.
Simply as it ' s revealed. Do properties still equal liability plus owner ' s. equity? Currently let ' s look at some purchases involving.
withdrawals, profits, as well as expenses as well as I want actually want you to remember the quiz that. you took what are the two things that make proprietors ' equity increase, what are both. things that make owner ' s equity reduction.
Remember that ok we give consulting. solutions and' we obtain three thousand dollars in cash.So we have a customer'we offer consulting. services to him or her as well as they pay us promptly 3 thousand bucks cash money. What is affected? Cash is influenced

and also yes this will certainly raise. Due to the fact that income is boosted, equity yet it boosts equity. Does that make sense? So the manner in which this looks resembles this revenue. below where ' s my tip whoops up below. When profits, revenue is an equity account. increases from your quiz that ' s one of the things that boosts equity which ' s why these. are included ok. So profits rises by 3 thousand
as well as likewise. our cash money goes'up by 3 thousand you with me? Accountancy equation still holds doesn '
t it. properties equal obligations plus owner ' s equity ok. Someone is working with something here in the. building. Alright let ' s have a look at the following transaction. we paid wages of 8 hundred bucks to employees now what is this this is an expense. now I want you'to remember expense are one of things that as they raise proprietor ' s. equity reduces right.Ok so how does this look whoops cash goes
. Due to the fact that we paid out 8 hundred bucks to our workers and our wages cost, down.
went up wages expense went up. Now bear in mind that as wage expense account.
boosts equity account decreases, since expenditures decrease equity. How does this look? It looks like this? And also I intend to make certain you recognize this. Expenditures rise expenses are not reduced.
We ' re going to deduct our costs. When you have an expense of course your cost. Allow ' s do one even more a withdrawal of five hundred.
Well it looks
like this your withdrawals actuallyReally
to be included. So if you take that twenty thousand plus 3. thousand that ' s twenty three minus'five hundred minus eight hundred oh,'and afterwards you have. to add your liabilities that ' s where they get that so this number is every one of these together. ok.But if wish to figure out my overall equity'. I add proprietor ' s resources, I subtract proprietor ' s withdrawal; I include profits I subtract expenses. do you comprehend'that? Any kind of questions because withdrawals reduce equity.
on that particular,

any type of concerns on that particular? Ok what I wish to do now real
fast is I want. to deal with a research instance in class I desire you to do work out one-thirteen workout,.
not quick study! Always listen if I ' m stating quick study, or.
workout, or problem, yet I desire you to do work out one-thirteen on the top of page thirty. 5 ok. For you folks at residence whenever we do this.
they ' re mosting likely to play this snazzy jazzy JCCC songs I want you do this in the house much like. if you were below in course. If you need more time just pause it and we ' ll.
go over the answer in a bit, but this is a really valuable time for you so allow ' s take. a few minute and we ' ll do exercise one-thirteen.
( songs 37:30 -43:44). When again for you folks at home if you ' re, ok.
not done simply pause it and also begin when you are done, however I want to ensure we obtain via.
the solutions prior to class mores than.

Okay exercise one-thirteen they want us to define. what was the likely'nature of each deal. In transaction A cash dropped by two-thousand. as well as land rose by 2 thousand so what occurred there? They took two-thousand dollars cash money and bought. some land right so cash money went down the land asset rose everything continues to be in equilibrium. correct.Transaction B workplace products increased by five.
hundred, accounts payable rose by 5 hundred what occurred there? We acquired 5 hundred bucks of workplace.
materials on credit history or on account in some cases we say. Deal C accounts receivable went by.

9 hundred and fifty bucks as well as profits went up by nine hundred and fifty dollars. Well we gave 9 hundred as well as fifty bucks '. well worth of services to our customers, yet they ' re mosting likely to pay us later on. We provided it on debt or on account it ' s. a balance due since we ' re mosting likely to receive money in the future, as well as we can recognize. Because of the income acknowledgment principle even though we haven ' t obtained, that earnings. the cash, due to the fact that we gave the service.Transaction D cash money goes down by 5 hundred. and also accounts payable'does down by 5 hundred what occurred'there? We settled that responsibility right our cash money. is decreased as well as our accounts payable obligation has likewise reduced right cool. Purchase E bear in mind exactly how'we had actually a. accounts receivable for nine hundred and also fifty right here the

client paid us they paid us money.
of nine hundred as well as fifty dollars to resolve that accounts receivable.We don ' t recognize income nothing happens. in the revenue column right, because we currently acknowledge the income. But money goes up which is a possession, accounts. receivable which is likewise an asset drops, make
sense? I want you to get really adept at examining. these as well as the majority of your research will involve this
kind of evaluation, are there. any type of concerns? If you try to make, it can ' t go out of balance. If it doesn ' t equilibrium you, a journal entry or you attempt to examine a purchase it has to stabilize. botched that ' s the elegance of it.You screwed up in your mathematics is that what you. are claiming? You botched in your math or you didn ' t evaluate. the deal properly the gorgeous feature of accounting is that it ' s accurate it has.
to be in balance. If you'do something and it ' s not in balance.
Someplace you went incorrect perhaps you effected the wrong account or perhaps the incorrect instructions.
Your research is right here on the display,.
you desire. Now I have a note down right here that says usage.
See that exercise one-eleven that I have as.
Referral as well as make use of that as kind of a template to do your homework, however have this. Obtain authorized up for your attach assignment. We ' ll see you following time bye.

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