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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 transactions1
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

unit 2 business transactions2
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
unit 2 business transactions3
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
unit 2 business transactions4
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.
unit 2 business transactions5
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
unit 2 business transactions6
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
unit 2 business transactions7
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