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Chapter 2

Analyzing Transactions: The Accounting Equation

 Learning Objectives

  • LO1    Define the accounting elements.
  • LO2    Construct the accounting equation.
  • LO3    Analyze business transactions.
  • LO4    Show the effects of business transactions on the accounting equation.
  • LO5    Prepare and describe the purposes of a simple income statement, statement of owner’s equity, and balance sheet.
  • LO6    Define the three basic phases of the accounting process.

LO5

  1. The Income Statement (See Figure 2-2) & WATCH THIS VIDEO
  2. In-Class Exercise: Complete Problems P2-10A, P2-10B –Create the income statements in the same Excel file you downloaded for P2-9A, P2-9B on pages 44 & 47–WATCH THIS VIDEO TO HELP YOU COMPLETE P2-10A
  1. The Statement of Owner’s Equity (See Figure 2-2) & WATCH THIS VIDEO
  2. In-Class Exercise (COMPLETE THEM IN ORDER):
    1. E2-6A page 43 (USE THIS VIDEO TO HELP YOU) RAISE YOUR HAND & SHOW ME BEFORE YOU DO THE NEXT PROBLEM
    2. E2-6B  page 46
    3. E2-7A page 43 (USE THIS VIDEO TO HELP YOU) RAISE YOUR HAND & SHOW ME BEFORE YOU DO THE NEXT PROBLEM
    4. E2-7B page 46
    5. P2-11A page 45 (USE THIS VIDEO TO HELP YOU) RAISE YOUR HAND & SHOW ME BEFORE YOU DO THE NEXT PROBLEM–Create the statements of owner’s equity in the same Excel file you downloaded for P2-9A, P2-9B on pages 44 & 47
    6. P2-11B page 47
  1. The Balance Sheet (See Figure 2-2) & WATCH THIS VIDEO
    1. In-Class Exercise:
      1. P2-12A page 45 (USE THIS VIDEO TO HELP YOU) RAISE YOUR HAND & SHOW ME BEFORE YOU DO THE NEXT PROBLEM–Create the balance sheets in the same Excel file you downloaded for P2-9A, P2-9B on pages 44 & 47
      2. P2-12B page 47

Guidelines for preparing financial Statements–READ AND DO:

  1. Standard formats should be used.
  2. Headings should be used on all statements.
  3. Single underline should be used to add or subtract numbers above the line; double underlines indicate a total.
  4. Dollar signs are used at the top of columns and beneath single (subtotal) underlines.
  5. Expenses may be listed from highest to lowest dollar amount.
  6. Assets are listed from most liquid to least liquid.
  7. Liabilities are listed from most current to the least current.

In-Class Exercise: Complete Exercises E2-5A, E2-5B with a partner. We will check them together.\

Homework: Study Guide Review Questions 16, 17, 18, 19; Study Guide Exercises 3, 9, 10, 11; Study Guide Problems 14, 15, 16, 17; End of Chapter Review Questions 4, 5, 6