Chris Hongye Yang
Teaching · Financial accounting

Balance Sheet Lab

Work through ten transactions and see how they change a company’s financial statements.

Audience: Undergraduate introductory accounting · 75 minutes

Start activityStudent and instructor materials
Mode
0 of 10 transactions recorded
Transaction 1 of 10

Founder invests cash

The founder invests $60,000 cash in Atlas Analytics in exchange for common stock.

Debit and credit guide

Debit and credit identify sides of an account. They do not mean increase and decrease by themselves; the account’s normal balance determines the direction of an increase.

Normal-balance guide used in this lesson
Account classNormal balanceExamplesHow it reaches the statements
Assets and expensesDebitCash, A/R, Inventory, Equipment, COGS, Operating ExpenseAssets remain on the balance sheet; expenses reduce net income.
Liabilities, contributed equity, and revenueCreditA/P, Notes Payable, Common Stock, Sales Revenue, Service RevenueLiabilities and Common Stock remain on the balance sheet; revenue increases net income.
Contra-assetsCreditAccumulated DepreciationDisplayed as a reduction of the related asset without removing original cost.
What is the overall effect on the accounting equation?
Predict before viewing the journal entry.

Opening balances

No transactions have been recorded yet.

Assets $0Liabilities $0Equity $0
Atlas Analytics — Assets
AccountBalance
Total assets$0
Liabilities and equity
AccountBalance
Liabilities
Equity
Total liabilities and equity$0

Every valid journal entry is balanced before it reaches these statements.

Check the accounting logic

1. Which transaction changes only the composition of assets?
Select one response.
2. Why is the bank loan not revenue?
Select one response.
3. Why does collecting Accounts Receivable not create revenue?
Select one response.
4. The company collects $10,000 for inventory that cost $6,000. What reaches retained earnings before other expenses?
Select one response.
5. Why can depreciation reduce net assets without reducing cash?
Select one response.

Public beta. No learner response is transmitted or stored.

Learning objectives and sequence

Follow transactions through journal entries to financial statements and retained earnings.

Teaching notes, objectives, and 75-minute sequence

Students predict each transaction’s effect before recording it. Instructors can skip between transactions, reveal answers, and enlarge the display for a projector.

Students should be able to

  1. Explain why Assets = Liabilities + Equity after every valid transaction.
  2. Classify common accounts and identify their normal debit or credit balance.
  3. Predict how a transaction changes at least two accounts before viewing the entry.
  4. Distinguish cash movement from revenue recognition and expense recognition.
  5. Read a simple journal entry and connect temporary accounts to net income.
  6. Explain how net income flows into ending retained earnings.
  7. Construct and verify an ending balance sheet from a transaction ledger.

Suggested 75-minute class

Lesson sequence
TimeTeaching move
0–10 minutesAccounting equation, normal balances, and Atlas Analytics setup
10–35 minutesGuided Transactions 1–6 with prediction and explanatory feedback
35–50 minutesTransactions 7–10; cash versus income recognition
50–60 minutesJournal entries, temporary accounts, net income, and retained earnings
60–70 minutesFive misconception-based concept checks
70–75 minutesReconstruct and explain the ending balance sheet

Teaching materials

For screen-reader access, use the Accessible HTML materials; the printable PDFs are not tagged.

Student handout

Learning objectives, transaction prompts, journal-entry workspace, concept checks, and final statement template.

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Instructor guide

75-minute lesson sequence, discussion prompts, expected responses, misconception interventions, and facilitation notes.

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Answer key

All ten journal entries, income statement, retained-earnings bridge, ending balance sheet, and concept-check explanations.

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Grading rubric

A 100-point rubric covering transaction analysis, entries, statement construction, and explanatory accounting logic.

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Common misconceptions

The instructor guide includes discussion questions for each misconception.

Cash is not automatically revenue

Owner investment and borrowing increase cash but do not represent earned income.

Cash payment is not automatically expense

Paying Accounts Payable settles a prior obligation; buying equipment exchanges one asset for another.

Inventory cost waits for the sale

Purchased inventory remains an asset until the related goods are sold and their cost becomes COGS.

Retained earnings is derived

Current-period revenue and expenses remain temporary accounts until net income is calculated and carried into ending retained earnings.