financial Accounting (1)
Section(2)
Professor of course
Dr
Abd El Hameed Shahin
Prepared by
Akram Samy
Nader Torky
the accounting equation
Assets = Liabilities + Owner's Equity
Assets are resources owned by a business.
Liabilities are creditorship claims on total assets.
Owner's equity is the ownership claim on total assets.
The expanded accounting
equation is:
Assets = Liabilities + Owner's Capital -Owner's
Drawings + Revenues - Expenses
• Owner's capital is assets the owner puts into the business. Owner's
drawings are the assets the owner withdraws for personal use. Revenues are
increases in assets or decreases in liabilities resulting from income-earning
activities. Expenses are the costs of assets consumed of services used in the
process of earning revenue.
Analyze the effects of business
transactions on the accounting equation
• transaction must have a dual effect on the accounting equation.
• For example,
• if an individual asset increases, there must be a corresponding
• (1) decrease in another asset, or
• (2) increase in a specific liability, or
• (3) increase in owner's equity.
Exercises(1)
Transaction Analysis
1. On October 1, 2023, Samy invests L.E 90,000 cash in the business.
2. Purchases equipment on account for L.E 15,500, payment due within the
month.
3. Receives L.E 5,000 cash in advance from a customer for services not yet
performed.
4. The company provides L.E 4,500 of programming services on account for
customers.
5. Purchases for L.E 6,000 on account from Ahmed Supply Company computer
paper and other supplies expected to last several months.
6. Pays the following expenses in cash for October: Store rent L.E 3,000, salaries
and wages of employees L.E 4,000, and utilities L.E 2,000.
7. Paid L.E 3,500 for Ahmed Supply Company.
Show the effects of the previous
transactions on the accounting
equation
1-On October 1, 2023, Samy invests L.E 90,000
cash in the business.
Assets = Liabilities + Owner's
Equity
Cash 0 Capital
900000 90000
2-Purchases equipment on account for L.E
15,500, payment due within the month
Assets = Liabilities + Owner's Equity
Cash 90000 Capital 90000
Equipment 15500 A.P 15500
3-Receives L.E 5,000 cash in advance from a
customer for services not yet performed
Assets = Liabilities + Owner's Equity
Cash 90000 Capital 90000
Equipment 15500 A.P 15500
Unearned Revenue
Cash 5000 5000
4- The company provides L.E 4,500 of programming
services on account for customers
Assets = Liabilities + Owner's Equity
Cash 90000 Capital 90000
Equipment 15500 A.P 15500
Unearned Revenue
Cash 5000 5000
AR 4500 Revenue4500
5-Purchases for L.E 6,000 on account from Ahmed
Supply Company computer paper and other supplies
expected to last several months.
Assets = Liabilities + Owner's
Equity
Cash 90000 Capital 90000
Equipment 15500 A.P 15500
Unearned Revenue
Cash 5000 5000
AR 4500 Revenue4500
AP.6000(AhmedCompany)
Supplies6000
6. Pays the following expenses in cash for October: Store
rent L.E 3,000, salaries and wages of employees L.E 4,000,
and utilities L.E 2,000
Assets = Liabilities + Owner's Equity
Cash 90000 Capital 90000
Equipment 15500 A.P 15500
Unearned Revenue
Cash 5000 5000
AR 4500 Revenue4500
Supplies6000 AP.6000(AhmedCompany)
Expense:
Cash(-9000) (-)3,000 Rent
(-)4,000 Sal. &Wages
(-)2,000 Utilities
7. Paid L.E 3,500 for Ahmed Supply Company.
Assets = Liabilities + Owner's Equity
Cash 90000 Capital 90000
Equipment 15500 A.P 15500
Unearned Revenue
Cash 5000 5000
AR 4500 Revenue4500
Supplies6000
AP (AhmedCompany) .6000 Expense:
Cash(-9000) (-)3,000 Rent
(-)4,000 Sal. &Wages
(-)2,000 Utilities
CASH(-3500)
AP.(AhmedCompany)(-3500)
Assets = Liabilities + Owner's Equity
No Unearned
Cash Equipment AR Supplies A.P Capital Revenue Expense
Revenue
1 90,000 90,000
2 15,500 15,500
3 5000 5000
4 4500 4,500
5 6000 6000
6 -9000 -9000
7 -3500 -3500
total 82500 15500 4500 6000 18000 5000 90000 4500 -9000
expanded accounting equation is:
Assets = Liabilities + Owner's Capital -Owner's
Drawings + Revenues - Expenses
• Assets = Liabilities + Owner's Equity
Unearned
Cash Equipment AR Supplies A.P Capital Revenue Expense
Revenue
108500 23000 85500
108500 108500
thank you all