Chapter 1 — Foundations & The Accounting Equation

Impact Analyst

Learning Outcome Covered: 1.4d

Analyze transactions and their impact on Owner's Equity.

📈 Increase

📉 Decrease

⚖️ No Change

🎯 Objective

Determine whether each business transaction will Increase, Decrease, or have No Effect on Equity.

🎮 How to Play

Read the transaction statement.
Decide if the statement is TRUE or FALSE.
Swipe RIGHT (or tap Green) for TRUE.
Swipe LEFT (or tap Red) for FALSE.
Earn 10 points for each correct answer. Wrong answers cost 3 points!

⭐ How stars work: more stars = a better result. 3 stars = no mistakes at all.

Show feedback on wrong answers

📚 Learning: Equity Analysis

📈 Transactions That INCREASE Equity

Revenue - Earning money from sales or services increases equity.
Owner Investments - Putting personal money or property into the business increases equity.

📉 Transactions That DECREASE Equity

Drawings/Dividends - The owner taking money out of the business decreases equity.

⚖️ Transactions That DON'T Change Equity

Buying Assets for Cash - You swap one asset (Cash) for another (Equipment). Net Assets unchanged.
Paying a Liability - Assets decrease and Liabilities decrease by the same amount. Equity is untouched.
Borrowing Money - Assets increase (Cash) and Liabilities increase (Loan). Equity is untouched.

⚠️ Common Trap!

Q: Does paying dividends reduce Net Income?

A: NO! Dividends reduce Retained Earnings directly. They are NOT an expense and do not affect Net Income calculation.

Quick Rules Reference

Event	Changes Equity?
Earn Revenue	YES (Increases)
Incur Expense	YES (Decreases)
Owner Withdrawals	YES (Decreases)
Buy Asset (Cash/Credit)	NO
Pay Liability	NO

Score

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Round

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📌 Before you play

Owner's Capital - the account that records the owner's share of the business.
Expenses - Costs of doing business you have already used (rent for a month you have used, wages, advertising) decrease equity.

Remember the accounting equation: Assets = Liabilities + Equity. If Assets change and Liabilities change by the same amount, Equity stays the same.

⏱ WHEN does equity change?

Equity changes on the day the work is done or the cost is used - not on the day money moves. Revenue is earned when the work is done, not when the customer pays.

Pay early for something you will use later? Equity does not change yet. It changes as you use it.

🏆 Game Complete!

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