TRANSACTIONS THAT AFFECT OWNER’S INVESTMENT, CASH AND CREDIT

Business Transactions

A business transaction is an economic event that causesa change – either an increase or a decrease – in assets,liabilities or owners equity

An account is a subdivision under assets, liabilities, orowners equity.

Shows the balance for a specific item and is a record of the increase ordecrease for that itemBusinesses set up their individual accounts and can range from a few tohundreds.

Accounts

Accounts receivable is the total amount of money owedto a business, money to be received later because of the sale of goods and services on credit and is listed as an asset.Accounts payable is the amount owed or payable to creditors of a business and is listed as a liability.

Transactions and the Accounting Equation

Once a transaction occurs, an accounting clerk analyzesthe transaction to see how it affects each part of the accounting equation.

Analyzing the Business Transaction

1. Identify the account affected2. Classify the account affected3. Determine the amount of increase or decrease for each account affected4. Determine the amount of increase or decrease for each account affected

Transactions Types

Most businesses have the following transactionsInvestments by the owner (Investment is money or otherproperty paid out to produce a profit).Cash transactionsCredit transactionsRevenue and expense transactionsWithdrawals by the owner

Transactions

Now review the transactions on pages 58-61