BA 211 Chapter 1-2: “Accounting Transactions”

AUDIO SPEAKER 1: Hi, again. We'' re continuing chapter one.
least 2 accounts in every transaction. It'' s always going to be at the very least two, 2 or even more. So'we ' re going to have some examples. Let'' s state the company simply started business,
they simply signed up the business, they'simply had their very own location. And afterwards they ' re mosting likely to raise cash money by providing stocks. To make sure that would certainly be the very first deal to record.
Now constantly believe, what are the 2 accounts that I need.
And after that the second action is to remind on your own where every single If you ' re, account is identified under the audit equation.And then determine. mosting likely to enhance'that account or decrease it. There is constantly an. increase and also decline, OK? When you increase, for instance,.
$ 100,000 cash from releasing stocks, that suggests we'' re going. Cash money is an asset.
shareholders' ' equity.
Cash is going to. increase by'$ 100,000. Remember it ' s the company'' s cash.
It ' s not the owner ' s cash. It ' s the business ' s money.
We, as accountants in that.
company, from our point of view, our
cash is boosting by $100,000. As well as on the other. side of the formula, the usual stock is increasing. by 100,000, also.
Under the assets, we.

know that cash is a possession.
We will state cash plus$ 100,000. Raises by$ 100,000.
Constantly remember something. incredibly, incredibly vital. That the formula has.
to remain equal for life. Regardless of the number of deals. we ' re mosting likely to have
, no matter how old the. business is, the equation is constantly mosting likely to be equivalent. after taping any transaction.
That was the. one we simply elevated cash. Now we have sufficient money. The next step we', allow ' s claim, we ' re. mosting likely to buy a piece of
tools for$ 20,000. And allow ' s claim that we ' re.
mosting likely to pay cash money for it, OK? The two accounts that.
we ' re mosting likely to need here are equipment, which is.
going to boost by $20,000. The various other account is the money, which. is going to decrease by $20,000. Because we ' re
mosting likely to spend. the money and also get devices. To tape that we ' re. going to claim cash decline. So it ' s a, which is. a minus by$ 20,000 and after that equipment. boost by $20,000. Now the inquiry is, the.
equation still equal? Well, it is

, since.
under the possessions side you can plainly see that you. have a decrease of$ 20,000, as well as an increase of.$ 20,000 under the assets.So that amount to possessions. is not'transforming.
It ' s still$ 100,000. And afterwards I still have$ 100,000 on.
OK, let ' s record one. Allow ' s claim that we ' re going to get.
This time we ' re not. mosting likely to pay cash for it. We ' re going to buy. supplies on account. Currently when we claim on account or on. credit, on account or on credit report, it suggests the exact same thing. It implies that we ' re. not going to pay now. It suggests that we will certainly pay in future.
Now bear in mind, if you ' re going.

to pay something in future for a quantity that is already. owed by you to somebody, that ends up being accounts payable,'which.
Remember, we ' re going to have two. Products, which is a possession. As well as allow ' s state the.
Simply an instance. And after that due to the fact that we did. not pay cash for them, our cash money account is not. going to be impacted. So we ' re mosting likely to have a responsibility.
account, which is accounts payable.
And after that normally we jot down. accounts payable like that.

A reduce B, accounts payable
. That is additionally going to. boost by
$1,000. When payable goes up by, due to the fact that. $1,000 it implies that what we owe is being raised from zero.There was no obligation.
Liability goes up
by$ 1,000. Currently if you look at.
the formula, if you look for out if it. is still equal or otherwise, well consider the assets side.

We just included the $1,000. Look at the other. side of the equation. Under obligation we just. Added the $1,000. So the formula is still equivalent. OK, let ' s have a 4th transaction.This time let ' s claim that. we are going to supply a service
to a customer for cash money. Bear in mind, if I ' m. going to receive cash.
Let ' s say it was. Under the possessions, we will. My money was raised by
$ 4,000.
Earnings, it ' s not identified normally. It will certainly show. And also later on we will.
revenue and also investors ' equity appears like.

However, for currently, you just need to know. that earnings once it goes when it increases, equity likewise goes up.So earnings plus$ 4,000. So we offered a service. It ' s worth $4,000. It ' s considered a revenue.
$ 4,000 in money goes up by$ 4,000. The formula is still equivalent.
Now allow ' s do one more transaction. We ' re going to complete.
So it ' s going to be formally. an earnings, a solution earnings.
We can not enhance the cash. Since we did not get money. And remember, accounts.
At least from our. Plus $3,000.
It ' s not yet cash money. Now let'' s chat regarding expenses. Let ' s have, allow'' s have.
buy, allow ' s spend for advertising.
We ' re mosting likely to market. It ' s a brand-new business, we.
have to advertise it. And after that allow ' s state. that we supplied, so'we were supplied an advertising and marketing occasion.
or perhaps it was an ad on a publication for let ' s state$ 500.
And also that we paid money. for it right away. So we ' re mosting likely to have.
a cost account. We ' re mosting likely to call that cost.
account advertising and marketing cost.

And also after that we paid cash, so our. money will certainly be involved, as well.So the two'accounts here are cash money. and after that if I ' m mosting likely to pay money, that implies my cash.
will certainly reduce by $500. And afterwards my expenditure,.
which is likewise going to review investors '.
equity much like revenues. Remember that costs. usually reflect negatively on' the investors ' equity.
That means whenever. we have an expenditure, the shareholders '.
equity will lower. It'' s not going to enhance. It will certainly reduce.
Advertising expense,.' It ' s raising, but what I ' m attempting to reveal below on. the formula on just how is that cost is mosting likely to review the equity. So I will just claim that it.
will certainly mirror adversely. It'' s going to be minus$ 500. My equation ' s still equivalent.
$ 500 decline of equity on the other side of the formula. That'' s how we show.
purchases on the equation.You ' re always

going. to have 2 accounts.
Those two accounts could be not 2. different areas in the formula. They could be in the same. location of the formula. If you look back in. the assets, for example, allow'' s go back to that tools. that we acquired for money. The two accounts that we used,. the equipment and the money, they were both properties. One of them was going up,.
the other one was decreasing. Although they are both on.
the one side of the formula, yet the overall assets did not alter. Due to the fact that we got a plus $20,000.
as well as we got a minus $20,000, which is not going to.
transform the total possessions, which will certainly keep the formula equivalent. And after that you see that.
in some transactions we had two accounts enhancing.
or 2 accounts lowering or more accounts, one.
And after that ultimately at. For example, if we. And then we boosted it by$ 4,000.
So then you can. compute the amount of cash
and also so you do $100,000, plus,. minus $20,000 that '
s $80,000. $80,000 plus $4,000.
that'' s $84,000 minus $500. That makes it $83,500. So my finishing equilibrium.
for cash is $83,500. And after that you do the very same.
thing for devices, products, accounts.
receivable, accounts payable. Each and every.
account that you have, that you have made use of.
throughout that period. And after that what we.
will certainly chat concerning next is just how to manage.
those finishing balances. What is the next action after you.
compute the finishing balances for each and every account? That will remain in the following video clip.

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