This should look relatively familiar. You see at the top, we have Assets equals Liabilities and Equity. Recall from last week that when we increase an asset, we have three choices to make. In order to keep the fundamental accounting equation in balance. If we increase an asset, we must either increase a liability, increase equity, or decrease an asset. Let's take a look at the first transaction. Cash of $25,000 is invested in Kiki company by investors in exchange for common stock. Kiki company is going to be the company that we are going to be utilizing for this entire certificate program. 25,000 cash comes in, in exchange for common stock, we will increase in asset, cash, we will also increase in equity account, common stock, 25,000 increase in assets, $25,000 increase in equity. Notice the big red bold numbers at the very bottom. This ensures that after each transaction that our assets equal liabilities plus equity. Let's take a look at the second transaction. Purchased office equipment for $17,000 in cash. Which accounts are involved? Office equipment, which is an asset, and cash, which is also an asset. One of these assets will increase, the other will decrease. We will have office Equipment increase by 17,000 and cash decrease by 17,000. Again, notice that the fundamental accounting equation is in balance. Our third transaction, purchase supplies for $7,500 on credit. Now the company is not paying cash, but instead they're paying on credit, so their debt, or obligation will increase. That is a liability and the account that we're utilizing is Accounts Payable. We will have an asset account supplies increase by 7,500, and we will also have a liability account, accounts payable, increased by 7,500. Again, notice our fundamental accounting equation is in balance. Transaction 4. Paid $3,000 in cash to creditors. Whenever you see paid, I want you to put in your mind that cash will go down. Asset cash will decrease and the amount owed to creditors will also decrease. We will decrease an asset and also decrease a liability. Again, our fundamental accounting equation is in balance. Our fifth transaction. Performed services for $4,700 in cash. Whenever you see performed services, I want you to think Revenue. In this transaction, the company earned revenue and received cash. We're going to have an asset cash increase. We will also have equity increase. We call that revenue increase, as equity. We will increase cash by $4,700, and increase revenue by $4,700. Again, our fundamental accounting equation is in balance. Transaction 6. Performed services for $3,500, on account. Again, perform services revenue, but instead of getting cash, the company gets it on account. Instead of increasing cash, a different asset called Accounts Receivable will be increased. We will increase an asset account, accounts receivable by 3,500, we will increase a revenue account which is under equity for 3,500. Our fundamental accounting equation is in balance. Transaction 7. Paid $2,100, for rent expense. Whenever you see paid, I want you to think cash. Cash again going down. It's going to affect asset cash and it will also affect equity expenses. We call that expenses decrease equity. We will decrease an asset account and decrease an equity account by $2,100. Transaction 8. Received $1,500 in cash from credit clients. The two accounts involved are going to be cash. Cash will go up from credit clients. It's going to affect two asset accounts, cash and accounts receivable. Cash will go up by 1,500, and accounts receivable will go down by 1500. Our ninth transaction. Paid $2,250, for salaries and wages. Again paid, that asset account called cash will decrease and an equity account will also decrease through expenses. Notice assets equals liabilities and equity our fundamental accounting equation holds. Then finally, transaction 10, the company paid a $1,000, dividend to stockholders. Paid, so you know, cash, which is an asset, will decrease and dividends, which is part of equity, will decrease. Dividends decrease equity. We have an asset account decreasing and an equity account decreasing. At the end of the day, our assets equal our liabilities plus equity. Our fundamental accounting equation holds. Thank you so much for joining me for week 3. You're going to get the opportunity to do an activity just like this to make sure you're understanding holds. I look forward to seeing you next week where we will be talking about the debit and credit rules with regards to using T accounts for these same exact transactions.
