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Unit # 2 – Business Transactions

Unit # 2 – Business Transactions. Miss Jando. Unit # 2 – Business Transactions. What is a business transaction? Exchange of things of value How do you record? You will be given a transaction analysis sheet to assist you. Transaction. Something is of value is given.

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Unit # 2 – Business Transactions

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  1. Unit # 2 – Business Transactions Miss Jando

  2. Unit # 2 – Business Transactions • What is a business transaction? • Exchange of things of value • How do you record? • You will be given a transaction analysis sheet to assist you Transaction Something is of value is given Something of value is received

  3. Unit # 2 – Business Transactions • Remember all transactions are analyzed by referring to the Balance Sheet Equation • Assets = Liabilities + Owners Equity • Assets are listed on the Left Hand Side (LHS) (of the =‘s sign) and therefore are always increased on this side • Liabilities & Owners Equity are listed on the Right Hand Side (RHS) and therefore are always increased on this side

  4. Unit # 2 – Business Transactions • You must know that: • Assets (A) = LHS • Liabilities (L) & Owners Equity (OE) = RHS • Double Entry Accounting Principle • For every accounting transaction, the LHS must equal the RHS • Therefore the LHS = RHS

  5. Unit # 2 – Business Transactions • Steps in recording Business Transactions • Determine which accounts are affected by the transaction. • How much do the accounts change. • Decide whether the change is an increase or decrease in the account. • Is the Equation still in Balance.

  6. Unit # 2 – Business Transactions • Example # 1 – Asset purchased for Cash • July 1 – Purchased new training equipment for $500 cash • Which Accounts are Affected? • Equipment (A) & Cash (A) • How much do the Accounts change by? • $500 • Do they Increase or Decrease • Equipment Increases, Cash Decreases • Is the Balance Sheet Equation still in balance? • Yes

  7. Unit # 2 – Business Transactions • Example # 2 – Asset purchased on credit • July 5 – Bought a computer for $750, on credit, from Central Computer Co. • Which Accounts are Affected? • Office Equipment (A) & Accounts Payable, Central Computer Co (L) • How much do the Accounts change by? • $750 • Do they Increase or Decrease? • OfficeEquipment Increases, Accounts Payable, Central Computer Co. Increases • Is the Balance Sheet Equation still in balance? • Yes

  8. Unit # 2 – Business Transactions • Example # 3 – Cash received by a customer • July 10 – Received $3000 cash from P. Diddy (who owed money) • Which Accounts are Affected? • Cash(A) & Accounts Receivable, P. Diddy (A) • How much do the Accounts change by? • $3000 • Do they Increase or Decrease? • Cash Increases, Accounts Receivable, P. Diddy Decreases • Is the Balance Sheet Equation still in balance? • Yes

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