Chapter 2
Linking Personal Accounting to Business Accounting
46
Transaction 15: A customer pays the amount owing
In transaction 6, Ace Bookkeepers provided services to a customer and allowed them to pay later.
Cash will only increase as payment is received. Recall that amounts owed by customers are recorded
in the asset accounts receivable. Thus, when a customer decides to pay their bill, accounts receiv-
able must decrease, since the amount has now been collected by the business. Notice that service
revenue is not affected by this transaction. Service revenue increased in transaction 6 when the
service was performed. This transaction is just an exchange of one asset for another, as shown in
Figure 2.28.
Record the transaction in the T-accounts
CASH
ACCOUNTS RECEIVABLE
+
+
-
-
500
500
Analyze the impact on the accounting equation
Assets = Liabilities + Owner’s Equity
+ 500
- 500
Explanation*
*Explanation of changes to Owner’s Equity
______________
FIGURE 2.28
Transaction 16: Paying a supplier the amount owing
In transaction 11, a telephone bill was received but not paid immediately. Cash will only decrease
when payment is made. Recall that amounts owed to suppliers are recorded in the liability accounts
payable. Thus, when Ace Bookkeepers pays the bill, accounts payable must decrease, since the
amount has now been paid to the supplier. Notice that telephone expense is not affected by this
transaction.Telephone expense increased in transaction 11 when the bill was received.This transac-
tion is just paying off debt, as shown in Figure 2.29.
Record the transaction in the T-accounts
CASH
+
-
3,000
- ACCOUNTS PAYABLE +
-
+
3,00
Analyze the impact on the accounting equation
Assets = Liabilities + Smith, Capital
- 300
- 300
*Explanation of changes to Owner’s Equity
______________
FIGURE 2.29
