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Accounting for a Service Business
Unit 1.3
Transactions
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What is a Transaction?
An event that occurs during the operation of a business and results in a financial change
A business transaction always includes an exchange of value
Something of value is given
Something of value is received
Transaction
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Transaction Analysis
Using the totals from a Balance Sheet, transactions can be examined and their effects will be immediately reflected on the net worth of a business
Transactions usually take place between accounting periods The period of time covered by an accounting
statement
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Questions to ask regarding a transaction…
Which items change in value as a result of the transaction? At least two accounts must be affected in order
for a transaction to be validHow much do these items change?Do the items increase or decrease in
value?After the change is recorded, does the
balance sheet equation still balance?
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Transaction Analysis Template
Found on the Share DrivePrint out a copy to fill in the numbers
manually or input the numbers directly on the computer
Use the latest Balance Sheet to create the Opening Balance
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Goldman Gym – Transaction Analysis
Transaction 1 Purchased new training equipment for $500
cash Training Equipment will increase by $500 Cash will decrease by $500
Cash now has a balance of $4,500 Equipment now has a balance of $95,000
Assets still equal Liabilities plus Equity
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Goldman Gym – Transaction Analysis
Transaction 2 Purchased office supplies for $55, on credit,
from Central Supply Co. Office Supplies increase by $55 Money owed (Accounts Payable) increases by $55
Office Supplies now has a balance of $555 Accounts Payable now has a balance of $4,055
Assets still equal Liabilities plus Equity
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Goldman Gym – Transaction Analysis
Transaction 3 Received $3,000 from customers who owed
money to the business Cash balance increases by $3,000 Accounts Receivable (money owed from customers)
decreases by $3,000
New Cash balance is $7,500 New Accounts Receivable balance is $3,000
Assets still equal Liabilities plus Equity
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Goldman Gym – Transaction Analysis
Complete the remaining transactions (page 18) yourself
As a hint…Total Assets = $242,480 at the end of the exercise
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Preparing a New Balance Sheet
Transfer the new balances from the transaction analysis sheet to a new balance sheet
Make sure the date reflects the changes in the account balances