Professional Documents
Culture Documents
In this presentation...
1.
2.
Business Transactions
Business transactions are occurrences that
affect the assets, liabilities and equity items in
an entity
A business transaction is recorded when
It can be reliably measured in monetary terms
It occurs at arms length
Examples of
business transactions
contribution of capital by owners
payment of salaries
receipt of bank interest
receipt of GST refund
purchase of laptop on credit
payment of accounts payable
depreciating office equipment
purchase of accounting software
charging interest on overdue accounts receivable
payment of advertising
withdrawal of capital
cash purchases
cash sales
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Personal Transactions
and Business Events
Personal transactions are transactions of the
owners, partners or shareholders that are
unrelated to the operation of the business
Business events are occurrences that will
probably affect the entity in some way, but are
not recorded as business transactions until an
exchange of goods occurs between the entity
and an outside entity
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Accounting Equation
ASSETS = LIABILITIES + EQUITY
A
(Own) =
(Owe) +
E
(Owner)
Duality (cont)
Cash Movement
Money paid or received (Cash account)
Money going to be paid or received (Accounts
Payable/Receivable)
Duality Example
The purchase of a motor vehicle via a loan
Cash effect Loan Payable (liability)
Payment will be made in the future
Truck
= Loan
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The Expanded
Accounting Equation
Recall Chapter 1
Income produces an increase in equity
Expenses result in decreases in equity
Therefore
Profit (loss) is added to (subtracted from) opening
equity on the balance sheet
ASSETS = LIABILITIES + EQUITY + INCOME EXPENSES
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Income Statement
R
Profits
Equity
A = L+ E
Less: E
Profits
-------Profit or Loss
Equity
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Transaction Analysis
1.
2.
3.
4.
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Transaction Analysis
Example 1
Capital contribution
Owner contributes $100,000 in cash to start a
business
=0
Transaction Analysis
Example 2
Purchase of an Asset with cash
Firm purchases new laptop computer for $3,500
and pays by cash
=0
+0
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Transaction Analysis
Example 3
Income Earned
CCS sends an invoice to Aussie Wallabies for providing
tennis coaching services totalling $30,000
=L
=0
+
+
E
Fees Revenue $30 000
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2. 2. Transposition error
Occurs when 2 of the digits are transposed
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Slides 23 to 26
Note
The topics on slides 23 to 26 being:
The Journal;
The Ledger; and
The Trial balance
are not taught in unit 200101 AIM.
They are shown here for a students general
awareness and knowledge.
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The Journal
Journals record transaction information found
on source documents
Entered in date order
The journal entry will consist of
the transaction date,
the name of the two accounts affected by the
transaction,
and whether each account is debited or credited.
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The Ledger
A ledger is an account that accumulates all the
information about changes in specific account
balances.
Each ledger account will have
a debit (left side)
a credit (right side)
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Summary
Business transactions are occurrences that
affect the assets, liabilities and equity items
in an entity
business transactions are an exchange of
goods that occurs between the entity and an
outside entity
The accounting equation
Assets = Liabilities + Equity
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Summary (Cont)
A transaction has a dual effect on the
equation
Cash movement effect
Category of transaction effect
Transaction analysis
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2.
3.
4.
Summary (cont)
An accounting worksheet is a summary of
business transactions
Good for smaller businesses
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