TRANSACTIONS THAT
AFFECT OWNER’S
INVESTMENT, CASH AND
CREDIT
Business Transactions
A business transaction is an economic event that causes
a change – either an increase or a decrease – in assets,
liabilities or owners equity
An account is a subdivision under assets, liabilities, or
owners equity.
Shows the balance for a specific item and is a record of the increase or
decrease for that item
Businesses set up their individual accounts and can range from a few to
hundreds.
Accounts
Accounts receivable is the total amount of money owed
to 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 analyzes
the transaction to see how it affects each part of the
accounting equation.
Analyzing the Business Transaction
1. Identify the account affected
2. Classify the account affected
3. Determine the amount of increase or decrease for
each account affected
4. Determine the amount of increase or decrease for
each account affected
Transactions Types
Most businesses have the following transactions
Investments by the owner (Investment is money or other
property paid out to produce a profit).
Cash transactions
Credit transactions
Revenue and expense transactions
Withdrawals by the owner
Transactions
Now review the transactions on pages 58-61