Ch01B — Accounting equation + transactions

Same story, different lens

We’re still working with Harborview Bike Repair in January 2026. This chapter uses the same four startup events from Ch01A — Startup, but the goal is to practice the reasoning behind each entry:

  1. What changed in the accounting equation?

  2. What debit/credit lines express that change?

Equation → journal (side-by-side)

Business event

Accounting equation view

Journal entry view

Owner invests $10,000 cash

Assets ↑ (Cash); Equity ↑ (Owner Capital)

Dr Assets:Cash 10,000 / Cr Equity:OwnerCapital 10,000

Cash customer pays $500

Assets ↑ (Cash); Equity ↑ via Revenue

Dr Assets:Cash 500 / Cr Revenue:ServiceRevenue 500

Buy $200 supplies (cash)

Assets ↓ (Cash); Equity ↓ via Expense

Dr Expenses:Supplies 200 / Cr Assets:Cash 200

Owner draws $100

Assets ↓ (Cash); Equity ↓ (Draws/Dividends)

Dr Equity:Dividends 100 / Cr Assets:Cash 100

What you’ll learn

  • Describe how each business event changes A / L / E

  • Translate a business event into a balanced journal entry (two or more lines)

  • Use LedgerLoom to confirm you didn’t “balance by accident”

Key accounting terms

  • Assets: resources the business controls (cash, equipment, inventory).

  • Liabilities: obligations the business owes (loans, accounts payable).

  • Equity: the owner’s residual claim (what’s left after liabilities).

  • Revenue: value earned from providing goods/services during the period.

  • Expense: costs incurred to earn revenue during the period.

  • Net income: revenue − expenses for the period; it increases equity.

  • Owner capital / retained earnings: where net income ultimately accumulates (depends on entity type/course).

  • Dividends / draws: distributions to the owner. They reduce equity but are not an expense.

What to do in your spreadsheet

For each event, do two passes:

  1. Equation pass: explain the change in Assets / Liabilities / Equity

  2. Journal pass: write the corresponding debit/credit lines

Export CSVs

Export (or edit directly) the journal lines:

  • inputs/<period>/transactions.csv

If you are using the workbook project created in Chapter 0, this is already in place.

Run LedgerLoom

From your workbook project folder:

ledgerloom check --project .
ledgerloom build --project . --run-id ch01

What to look at

  • entries.csv: what LedgerLoom ingested (grouped by entry_id)

  • trial_balance_unadjusted.csv: your “transactions-only” trial balance

If your spreadsheet totals don’t match the unadjusted trial balance, you have a reconciliation problem (not a “LedgerLoom problem”). Use Workbook Troubleshooting.

Compare against the answer key

This chapter’s concepts are applied using the same Chapter 0/1 startup dataset. Use the Ch01 packs if you want a known-good reference:

Common mistakes

  • Treating an asset purchase as an expense (e.g., supplies vs supplies expense)

  • Recording one-sided entries (missing the second line)

  • Mixing up account roots (Assets vs Expenses vs Equity)

Downloads

Use the Ch01 startup packs:

Next chapter

Continue to Ch02 — Journal to trial balance.