week 1 lesson 2
TRANSCRIPT
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ROPEAN INTERNATIONAL COLL
tr!"u#ti! t! A##!uti$
Dr% Lu&i#a 'erma
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Dr% Lu&i#a 'erma
(ee) 1* Le#ture 2Out+ie
• The accounting procedure and system
• Meaning of Some terms
assumption of Business Entity
Historical costObjectivity
Continuity
Measuring Units
Matching rincipal
• !orm of Business and their Business
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Leari$ Out#!me
• "ill a clear concept accounting procedure
• "ill have idea about some important terms of
#ccounting
• Understand di$erent types of Business
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Leari$ !b-e#ti&e
U"erta"i$ S!me a##!uti$ term
assumption of Business Entity
Historical cost
Objectivity
ContinuityMeasuring Units
Matching rincipal
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.ai# A##!uti$ Term
Transactions: Transactions are those activities of a business, which involve
transfer of money or goods or services between two persons or two
accounts. For example , purchase of goods, sale of goods, borrowing from
bank, lending of money, salaries paid , rent paid, commission received and
dividend received.
Transactions are of two types, namely,
Cash Transaction is one where cash receipt or payment is involved in the
transaction.
For example, When Ram buys goods from Kanha paying the price of goods by
cash immediately, it is a cash transaction.Credit Transaction is one where cash is not involved immediately but will be
paid or received later.
In the above example, if Ram, does not pay cash immediately but promises to
pay later, it is credit transaction.
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.ai# A##!uti$ Term
Proprietor
A person who owns a business is called its proprietor. Hecontributes
capital to the business with the intention of earning profit.
Capital: It is the amount invested by the proprietors in the business.
• This amount is increased by the amount of profits earned and the
amount of additional capital introduced.
• It is decreased by the amount of losses incurred and the amountswithdrawn.
For example, if Mr.Anand starts business with !s.",##,###, his
capital would be !s.",##,###.
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.ai# A##!uti$ TermAet/ #ssets are the properties of every description
belonging to the
business% Cash in hand& plant and machinery& furnitureand 'ttings& ban( balance& debtors& bills receivable&stoc( of goods& investments& )ood*ill%
#ssets can be classi'ed into+
,% Tangible Assets: These assets are those having physical
e-istence% .t can be seen and touched% !or e-ample&plant / machinery& cash& etc%
2. Intangible Assets: Intangible assets are thoseassets having no
physical e-istence but their possession gives rise tosome rights and
bene'ts to the o*ner% .t cannot be seen and touched%
IPORTANT
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.ai# A##!uti$ Term
Debtors
A person $individual or firm% who
receives a benefit without giving
money or money&s worth
immediately, but liable to pay in
future or in due course of time is a
debtor.
The debtors are shown as an asset in
the balance sheet.
For example, Mr. Arun bought
goods on credit from 'r.(abu for
!s.)#,###.
'r. Arun is a debtor to 'r.(abu
till he pays the value of the goods.
Creditors
A person who gives a benefit
without receiving money or
money&s worth immediately
but to claim in future, is acreditor.
The creditors are shown as a
liability in the balance sheet.
In the above example 'r.(abu
is a creditor to 'r.Arun till he
receive the value of the goods.
IPORTANT
IPORTANT
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.ai# A##!uti$ Term
Liabilities
• *iabilities refer to the
financial obligations of a
business.
• These denote the amounts
which a business owes to
others,
• e.g., loans from banks or
other persons, creditors forgoods supplied, bills payable,
outstanding expenses, bank
overdraft etc.
Drawings
It is the amount of cash
or value of goods
withdrawn from the business by the
proprietor for his
personal use.
It is deducted from the
capital.
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.ai# A##!uti$ Term
Purchases
• +urchases refers to the
amount of goods bought by a
business for resale or for use
in the production.
• oods purchased for cash are
called cash purchases.
• If it is purchased on credit, it
is called as credit purchases.• Total purchases include both
cash and credit purchases.
Purchases Return or
Returns Outward
• -hen goods are returned to
the suppliers due to
defective uality or not as
per the terms of purchase, it
is called as purchases
return.
• To find net purchases,
purchases return is deducted
from the total purchases.
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.ai# A##!uti$ Term
Sales
• /ales refers to the amount of
goods sold that are already
bought or manufactured by
the business.
• -hen goods are sold for cash,
they are cash sales
• (ut if goods are sold and
payment is not received at thetime of sale, it is credit sales.
• Total sales includes both cash
and credit sales.
Sales Return or Returns
Inward
• -hen goods are returned
from the customers due todefective uality or not as
per the terms of sale, it is
called sales return or
returns inward.
• To find out net sales, sales
return is deducted from
total sales.
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• Re&eue means the amount receivable or reali0ed
from sale of goods and earnings from interest÷nd& commission& etc%
• Epee
.t is the amount spent in order to produce and sellthe goods and services%
!or e-ample& purchase of ra* materials& payment ofsalaries& *ages& etc%
• I#!me
.ncome is the di$erence bet*een revenue ande-pense%
.ai# A##!uti$ Term
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.ai# A##!uti$ Term
'!u#her
• .t is a *ritten document insupport of a transaction%
• .t is a proof that a
particular transaction hasta(en place for the valuestated in the voucher%
• .t may be in the form ofcash receipt& invoice& cash
memo& ban( pay1in1slipetc%
• 2oucher is necessary toaudit the accounts%
I&!i#e
• .nvoice is a businessdocument *hich is prepared*hen one sell goods toanother%
• The statement is preparedby the seller of goods%
• .t contains the informationrelating to name andaddress of the seller and thebuyer& the date of sale andthe clear description ofgoods
• *ith 3uantity and price%
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.ai# A##!uti$ Term
Receipt
• !eceipt is an
acknowledgement forcash received.
• It is issued to the party
paying cash.
• !eceipts form the basis
for entries in cash book.
Account
• Account is a summary of
relevant business transactions
at one place relating to a
person, asset, expense orrevenue named in the heading.
• An account is a brief history
of financial transactions of a
particular person or item.• An account has two sides
called debit side and credit
side.
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)##
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,4
)enerally #ccepted #ccounting
rinciples
rofessionals in the 'eld of accounting have *or(edhard to develop and consistently follo* generally
accepted accounting principles 5)##6& in order todescribe the best method of recording any 'nancialtransaction and to ensure that readers of 'nancialstatements can immediately depend upon their
accuracy%
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,7
Geera++ A##epte"A##!uti$ Pri#ip+e
• Eleven of the most critical generally acceptedaccounting principles all managers simply must
recogni0e include+
– 8istinct business entity principle – )oing concern principle – Monetary unit principle – Time period principle – Cost principle – Consistency principle
– Matching principle – Materiality principle – Objectivity principle – Conservatism principle – !ull disclosure principle
IPORTANT
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The Diti#t .uie EtitPri#ip+e
• The distinct business entity principlestates that a business:s 'nancialtransactions should be (ept completely
separate from those of its o*ners%• There are three basic types of business
o*nership in the United States%
– Corporation – artnership
– roprietorship
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,;
The G!i$ C!#erPri#ip+e
• The going concern principle means thataccountants ma(e the assumption that thebusiness *ill be ongoing 5continue to e-ist6inde'nitely and that there is no intention to
li3uidate 5sell6 all of the assets of the business%
• The going concern principle clearly directsaccountants to record the value of a business:s
assets only at the price paid for them& so thatreaders of a 'nancial statement (no* that assetvalues represent a business:s true cost& and notthe cost of li3uidation or replacement%
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<=
The !etar UitPri#ip+e
• The monetary unit principle means that 'nancialstatements must be prepared in a speci'ccurrency denomination% .n the United States& theU%S% dollar is the monetary unit used for preparing
'nancial statements%
• !ul'lling the monetary unit principle can be 3uitecomplicated& since companies often operate in
more than one country& and use more than onecurrency in their operating transactions%
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<,
The Time Peri!"Pri#ip+e
• The time period principle re3uires a business toidentify the time period for *hich its 'nancialtransactions are reported%
• # 'scal year consists of ,< consecutive months 5butnot necessarily beginning in >anuary and ending in8ecember li(e a calendar year6%
• The amount of time included in any summary of'nancial information is called an accounting period%
• The managers of a business may be most
interested in monthly& *ee(ly& or even daily'nancial summary reports%
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<<
The C!t Pri#ip+e
• The cost principle re3uires accountants to recordall business transactions at their cash cost%
• 0or example, if a piece of land is purchased for !s.",##,###and its market value is !s.1,##,### at the time of preparing
final accounts the land value is recorded only for !s.",##,###.
• Thus, the balance sheet does not indicate the price at which theasset could be sold for.
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<?
The C!ite#Pri#ip+e
• The consistency principle of accounting statesthat a business must select and consistentlyreport 'nancial information under the rules of thespeci'c reporting system it elects to use%
• .n an accrual accounting system& revenue isrecorded *hen it is earned& regardless of *hen itis collected& and e-penses are recorded *henthey are incurred& regardless of *hen they arepaid%
• # cash accounting system records revenue asbeing earned *hen it is actually received andrecords e-penditures *hen they are actually paid®ardless of *hen they *ere incurred%
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<@
The at#hi$ Pri#ip+e
• The matching principle is designed to closelymatch e-penses incurred to the actual revenuethose e-penses helped generate%
• This principle applies to those organi0ations thatelect to use an accrual system of accounting%
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<A
The ateria+it Pri#ip+e
• The consistency and matching principles re3uireaccountants to e-pense the cost of certain long1life assets li(e furniture and e3uipment over thetime period in *hich they *ill help a business
generate revenue%• The materiality principle& ho*ever& allo*s
accountants& under very strict circumstances& tovary from these t*o important principles%
• The materiality principle means that if the value ofan item is deemed to be not signi'cant& then otheraccounting principles may be ignored if it is notpractical to use them%
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The Ob-e#ti&it Pri#ip+e
• The objectivity principle states that 'nancialtransactions must have a con'rmable 5objective6basis in fact%
• Sales should have substantiating evidence toprove that they actually occurred& such as guestchec(s& ban( card statements& or various salesrecords maintained in an electronic cash registeror computer%
• Before they can be recorded as having beenincurred or paid& e-penses must be veri'ed *ithevidence such as delivery slips or original
invoices supplied by vendors& cancelled chec(s&or documented electronic funds transfers 5E!Ts6%
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The Conservatism rinciple
• The conservatism principle re3uires theaccountants of a business to be conservative*hen reporting its revenue 5and thus not toreport it until it is actually earned6 and realistic
*hen reporting its e-penses and other liabilities%
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The u++ Di#+!urePri#ip+e
• The full disclosure principle re3uires that any past oreven future event *hich could materially a$ect the'nancial standing of the business and that cannot beeasily discerned from reading the business:s'nancial statements must be separately reported%
• These reports& prepared in the form of footnotes&must be attached to the 'nancial statementsprepared by the business:s accountants%
• E-amples of such events include signi'cant la*suits&
changing from a cash to an accrual accountingsystem& signi'cant ta- disputes& modifyingdepreciation schedules& or unusual events%
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Leari$ !b-e#ti&e
U"erta"i$ "ieret !rm !5.uie a" their .uie
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!rm !5 .uie
• Sole roprietorSole Trader
• artnership
•Companies
Short Assignment ,%Briey e-plain for all stated form ofbusiness%
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Sole roprietor or Sole Trader
• Business o*nership is a single business carriedon by individuals and o*ned by individual full%
• Business o*ner have a po*er to control thebusiness operations%
• O*ners and business is referred to as one of thesame entity% Do separation bet*een them%
• O*ners *ill received all the pro'ts and bear forall losses from business%
• Unlimited liabilities
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A"&ata$e
• Easy to set up%
• The o*ner has absolute po*er to control thebusiness%
• !ast decision ma(e by the o*ner of the business%
• .ndividual Ta-%
• Do need the comple- 'nancial reports%
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Dia"&ata$e
• 8icult to gro* because of the limited capacityof capital
• 8icult to get capital 'nancing from the 'nancialinstitution because they need a strong assurance
from the business%
• Fiability is unlimited%
• Business *ill disband itself if the o*ner died%
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Parterhip
• # partnership is de'ned as the relationship thate-ist bet*een person carrying on business%
These person agree to combine some or all theirproperty& labor and s(ill% This relationship is
based on contract%• Business o*ned by minimum of t*o persons andma-imum of <= persons%
• rofessional service partnerships consist ofma-imum A= persons%
• There are t*o types of partnerships+
1#ctive partner
1Sleeping partner
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Parterhip
• Strictly follo* the artnerships #ct ,;4, andpartnerships contract of agreement for pro't andloss distribution%
• Fiability for partnerships is unlimited e-cept for
the limited partnerships%
• )eneral partners have unlimited liability forpartnerships debts& and the partnershipsterminates *hen a general partner *ishes to sell
out or dies%
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A"&ata$e
• artnerships allo* for a greater amount ofmoney& s(ill and other resources to be pooled%
• They are relatively easy to organi0e%
• They are subject to limited governmentregulations and do not face high ta- rates%
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Dia"&ata$e
• artnerships have a limited life%
• Each partner is subject to unlimited liability% Thismeans that if the company fails& creditors canta(e action against both the partnership and the
persons *ho are in it%
• artners have mutual agency% This means thatone partner can ma(e decisions *ithoutconsulting to other5s6%
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C!rp!rati!
• # business created as a distinct legal entitycomposed of one or more individuals or entities%
• .n Malaysia& corporations are follo* strictly underCompany #ct ,;4A%
• Corporation are divide into t*o1rivate Fimited
1ublic Fimited
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C!rp!rati!
• rivate limited can be held by minimum of < andma-imum of A= shareholders%
• There is no ma-imum shareholders for ubliclimited company%
• Shareholders *ill received their pro't in the formof dividend%• Corporation managed by Board of 8irector that
appointed by shareholders in #)M%• Fiability of shareholders is limited base on the
paid up capital%• Ta- is paid& base on company pro't%• Eg+ Tenaga Dasional Berhad& Safeguard Securicor
Sdn Bhd%
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Corporation# #!rp!rati! 5sometimes referred to as a C
#!rp!rati!6 is an independent legal entity o*nedby shareholders% This means that the#!rp!rati! itself& not the shareholders that o*nit& is held legally liable for the actions and debtsthe business incurs%
• #dvantages
– Unlimited life – Easy transfer of o*nership – Fimited liability – Ease of raising capital
• 8isadvantages
– 8ouble ta-ation – Cost of set1up
and report 'ling
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Suggestion
• #ccounting Cycle
• )##
• !orms of Business
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6UESTION7
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(ee) 1 8 Le#ture 2 Out+ie
• Basic #ccounting e3uation
• #sset
• Fiabilities
• O*ners e3uity
• evenue and e-penses
• Business Transaction
• #nalysis the e$ect of businesstransaction on the basic accountinge3uation
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Leari$ Out#!me
#fter completing this chapter you *ill beable to
• Understand the accounting e3uation• )et an idea about the components of
accounting system
• .nterpret the e$ect of businesstransaction on the basic accountinge3uation
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Leari$ !b-e#ti&e
.ai# A##!uti$ e9uati!
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• A##!uti$ a a :h!+e i bae"! a i$+e e9uati!/
ASSETS ; E6UIT< =LIA.ILITIES
The #ccounting e3uation
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DOU.LE*ENTR< S<STEDOU.LE*ENTR< S<STE
I a "!ub+e*etr tem, e9ua+"ebit a" #re"it are ma"e ithe a##!ut 5!r ea#htraa#ti!%
Thu, the t!ta+ "ebit :i++ a+:ae9ua+ the t!ta+ #re"it a" thea##!uti$ e9uati! :i++ a+:a
ta i ba+a#e%
Assets Liabilities Equity
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• "ell& in order to ans*er that 3uestion*e need to loo( at *hat each of theterms in the e3uation meanI
,% #ssets
<% Fiabilities
?%O*ner:s E3uity
So *hat does the
accounting e3uation meanJ
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• Ofcial Denition: A resourcecontrolled by the enterprise as aresult o past events and rom which
uture economic benets areexpected to ow to the enterprise
"hat is an assetJ
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• Fand
• Computer
• 2ehicle
• Cash
e-amples
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1%DOES <OUR .USINESSO(N>CONTROL IT7
2%(ILL IT .RING <OUR .USINESS
.ENEITS IN T?E UTURE7
3%CAN <OU 'ALUE IT ACCURATEL<7
So the ull test of *hether
something is an asset is+
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De#reae Aet I#reae Aet
urchasing Supplies 5The assetaccount !ash decreases6
urchasing Supplies 5The assetaccount Supplies increases6
O*ner 8ra*s O*ner Contributions
epaying ban( loans eceiving ban( loansCredit purchases
Changes in assets
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ASSETS ; E6UIT< = LIA.ILITIES
• The a##!uti$ e9uati! i"i#ateh!: mu#h !5 the aet !5 a buie
belong t!, !r are owned , b :h!m% • #ssets can only Kbelong: to t*o types of
people+ – people outside the business *ho are o*ed
money 5liabilities6
– the owner himsel 5owner"s e#uity 6%
The accounting e3uation
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De#reae O:er@ E9uit I#reae O:er@ E9uit
E-penses evenues
Fosses )ains
O*ner *ithdra*s O*ner investments
Beginning Capital
Changes in o*ner:s e3uity
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• .ncome
• E-ample+ a service company earnsrevenue *hen it provides services to
its clients
• ecorded as an increases in o*ner:se3uity and an increase in assets
evenues
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• The costs the company incurs incarrying on operations in its e$ort tocreate revenue
• De#reae !:er@ e9uit
• Can be paid for *ith cash 5decreasesassets6
• Or charged 5increase liabilities6
E-penses
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o*ner:s e3uity
Beginning
CapitalFUS
#dditional.nvestment
Det .ncomeL
evenues11 E-penses
"ithdra*s 11
.f e-penses are greater than revenues& then a net loss *ould result% This loss *ould be subtracted from capital because it *ould be a
negative number%
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A9
E6UIT< is the O(NER@S CLAI ONASSETS
.n a business ENU.T is composed offour parts that either increase ordecrease e3uity+
CAPITAL/(hat the
!:erput it!
thebuie
−
(IT?DRA(ALS/
(hat the!:er
ta)e !ut !5the
buie
RE'ENUE
S/
(hat the#!mpare#ei&e5!r a+e
−
EPENSES/
(hat the#!mpapa t!!perate
thebuie%
INCREASE DECREASE INCREASEDECREASE
E6UIT<
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A;
Sometimes *e e-pand the
#ccounting E3uation to sho* allthe E3uity components% This is
called the EPANDED ACCOUNTING
E6UATION%
This e3uationmust AL(A<S .E
IN .ALANCE
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Transaction #nalysis
Business activities can be described interms of transactions and events% E-ternaltransactions are e-changes of value
bet*een t*o entities& *hich yield changesin the accounting e3uation% .nternaltransactions are e-changes *ithin anyentityP they can also a$ect the accounting
e3uation% Events refer to happenings thata$ect an entity:s accounting e3uation andcan be reliably measured% Transactionanalysis is de'ned as the process used to
analy0e transactions and events% )23#
+)
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#ccounting Transactions%%%
are economic eventsthat must be recorded
in the 'nancialstatements becausethey a$ect
assets liabilities andor stoc(holders:
e3uity
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Transaction #nalysis
• The process of identifying thespeci'c e$ects of economicevents on the accounting
e3uation%
• Each transaction has a dual5double1sided6 e$ect on theaccounting e3uation%
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Steps in transaction analysis
Step 1/ I"eti5 the ame !5 a##!ut
Step 2/ C+ai5 the A##!ut
Step 3/ Aa+Be the impa#t !a##!uti$ e9uati!
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Steps in transaction analysis
Step 1/ I"eti5 the ame !5 a##!ut >im:s FemonadeChart of #ccounts
,=, 1 Cash,=A 1 #ccts eceivable,,= 1 Oce Supplies,A= 1 E3uipment<=, 1 #ccounts ayable<,= 1 "ages ayable?=A 1 Common Stoc(?<= 1 etained Earnings
@=, 1 Sales 1 Femonade@,= 1 Sales Q CateringA=, 1 Femon E-penseA=A 1 .nsurance E-penseA,= 1 Oce E-pense
Transaction #nalysis
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Transaction #nalysis
The balances so far appear below. Note that theBalance Sheet Equation is still in balance.
+)
)23"
Transaction #nalysis
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Transaction #nalysis
N!:, +et@ +!!) at traa#ti!
i&!+&i$ re&eue, epeea" "i&i"e"%
+)
)233
Transaction #nalysis
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Transaction #nalysis
Provided consulting services receiving!"### cash.
+)
)234
Transaction #nalysis+)
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Transaction #nalysis
$e%e%ber that e&penses decrease equity.
Paid salaries of '## to e%ployees.
+)
)231
Transaction #nalysis+)
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Transaction #nalysis
$e%e%ber that dividends decrease equity.
(ividends of )## are paid to shareholders.
+)
)235
E # t h
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Every #ccount has+
#n .ncrease Side&and
# 8ecrease SideBut& Some
#ccounts .ncreaseon the 8ebit Side
#nd& Some#ccounts .ncreaseon the Credit Side
Eff t f T ti * , E it
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7,
*+NE$,S E-/T0
Effects of Transactions on *wner,s EquityEffects of Transactions on *wner,s Equity
Eff t f T ti * , E it
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7<
*+NE$,S E-/T0
Effects of Transactions on *wner,s EquityEffects of Transactions on *wner,s Equity
decreased by
Eff t f T ti * , E it
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7?
*+NE$,S E-/T0
Effects of Transactions on *wner,s EquityEffects of Transactions on *wner,s Equity
*wner,s withdrawals
E&penses
decreased by
Eff t f T ti * , E it
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7@
*+NE$,S E-/T0
Effects of Transactions on *wner,s EquityEffects of Transactions on *wner,s Equity
increased by
Eff t f T ti * , E it
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7A
*+NE$,S E-/T0
Effects of Transactions on *wner,s EquityEffects of Transactions on *wner,s Equity
*wner,s invest%ents
$evenues
increased by
Effects of Transactions on * ner,s Eq it
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74
*+NE$,S E-/T0
Effects of Transactions on *wner,s EquityEffects of Transactions on *wner,s Equity
*wner,s withdrawals
E&penses
*wner,s invest%ents
$evenues
decreased by increased by
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77
The #ccounting E3uation
h i i
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79
Economic
esources
Claims to
Economicesources
The #ccounting E3uation
Assets $ %iabilities & Owner"s '#uit
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7;
$esources
The Accounting Equation
What are an organization’s resources called?
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9=
Assets
$esources 1 Sources
The Accounting Equation
What are the
sources of the
assets?$esources usedin the business
Th A i E i
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9,
Assets
Liabilities
*wner,s
Equity
$esources 1 Sources
$esources usedin the business
$esourcessupplied by
creditors andowners
The Accounting Equation
B i T ti
Business Transactions
7/24/2019 week 1 lesson 2
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9<
a. Sachin deposits 2)"### in a ban3 account forAB4 Ltd
ASSETS
;
Business TransactionsBusiness Transactions
*+NE$,S E-/T0
L/AB/L/T/ES
B i T ti
Business Transactions
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9?
a. Sachin deposits 2)"### in a ban3 account forAB4 Ltd.
ASSETS
;
Business TransactionsBusiness Transactions
*+NE$,S E-/T0
4ash2)"###
L/AB/L/T/ES
B i T ti
Business Transactions
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9@
a. Sachin deposits 2)"### in a ban3 account forAB4 Ltd.
ASSETS
;
Business TransactionsBusiness Transactions
*+NE$,S E-/T0
4ash2)"###
L/AB/L/T/ES
Sachin" 4apital2)"###
Business Transactions
Business Transactions
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9A
Business TransactionsBusiness Transactions
b. AB4 Ltd. buys land for 2#"###.
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
Business Transactions
Business Transactions
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94
Business TransactionsBusiness Transactions
b. AB4 Ltd. buys land for 2#"###.
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
4ash
52#"###6
Business Transactions
Business Transactions
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97
Business TransactionsBusiness Transactions
b. AB4 Ltd buys land for 2#"###.
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
4ash
52#"###6
Land2#"###
Business Transactions
Business Transactions
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99
Business TransactionsBusiness Transactions
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
c. AB4 Ltd buys goods for 7"!)#" agreeing to paythe supplier in the near future.
Business Transactions
Business Transactions
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9;
Business TransactionsBusiness Transactions
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
c. AB4 Ltd buys goods for 7"!)#" agreeing to paythe supplier in the near future.
Accounts Payable
7"!)#Purchases7"!)#
Business Transactions
Business Transactions
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;=
Business TransactionsBusiness Transactions
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
e. AB4 Ltd paid8 wages 2"72)9 rent" '##9utilities" :)#9 and %iscellaneous" 2;).
Business Transactions
Business Transactions
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;,
Business TransactionsBusiness Transactions
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
4ash5!"<)#6
e. AB4 Ltd paid8 wages 2"72)9 rent" '##9utilities" :)#9 and %iscellaneous" 2;).
Business Transactions
Business Transactions
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;<
Business TransactionsBusiness Transactions
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
4ash5!"<)#6
E&penses5!"<)#6
e. AB4 Ltd paid8 wages 2"72)9 rent" '##9utilities" :)#9 and %iscellaneous" 2;).
Business Transactions
Business Transactions
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;?
Business TransactionsBusiness Transactions
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
f. AB4 Ltd pays =)# to creditors on account.
Business Transactions
Business Transactions
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;@
Business TransactionsBusiness Transactions
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
4ash5=)#6
f. AB4 Ltd pays =)# to creditors on account.
Business Transactions
Business Transactions
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;A
Business TransactionsBusiness Transactions
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
4ash5=)#6
Accounts Payable5=)#6
f. AB4 Ltd pays =)# to creditors on account.
Business Transactions
Business Transactions
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;4
Business TransactionsBusiness Transactions
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
h. Sachin withdraws 2"### in cash.
Business Transactions
Business Transactions
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;7
Business TransactionsBusiness Transactions
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
4ash52"###6
h. Sachin withdraws 2"### in cash.
Business Transactions
Business Transactions
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;9
Business Transactions
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
4ash52"###6
Sachin,s" (rawing52"###6
h. Sachin withdraws 2"### in cash.
Transaction Su%%ary
Transaction Su%%ary
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;;
Transaction Su%%aryy
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
4ash <";##Purchases ))#Land 2#"###
Transaction Su%%ary
Transaction Su%%ary
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,==
Transaction Su%%aryy
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
4ash <";##Purchases ))#Land 2#"###
Accts. Payable :##
Transaction Su%%ary
Transaction Su%%ary
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,=,
Transaction Su%%aryy
ASSETS
;*+NE$,S E-/T0
L/AB/L/T/ES
4ash <";##Purchases ))#Land 2#"###
Accts. Payable :##
Sachin" 4apital 2)"###Sachin" (rawing 52"###6>ees Earned ;")##+ages E&pense 52"72)6$ent E&pense 5'##64o%%ission 5:)#6?isc. E&pense 52;)6
ER#MFE
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ER#MFE
• .ssuing stoc(s for cash or other assets 4===• Buying assets by borro*ing money 5ta(ing a
loan from a ban( or simply buying on credit6,====
• Selling assets for cash to pay o$ liabilities+both assets and liabilities are reduced ;==
• Buying assets by paying cash by shareholders
money 54==6 and by borro*ing money 5@==6• Earning revenues 7==
,=<
Eamp+e
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Eamp+e
TransactionDumber
#ssets FiabilitiesShareholdersE3uity
, 4&=== 4&===
< ,=&==
=
,=&===
? ;== ;==
@ ,&=== @== 4==
A 7== 7==
Some more E-amples
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Some more E-amples
• aying e-penses 5e%g% rent orprofessional fees6 or dividends <==
• ecording e-penses& but not paying
them at the moment ,==• aying a debt that you o*e A==
• eceiving cash for sale of an asset+
one asset is e-changed for anotherPno change in assets or liabilities
,=@
Solutions
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SolutionsI
4 <== <==
7 ,== ,==
9 A== A==
; = = =
TransactionDumber
#ssets FiabilitiesShareholdersE3uity
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