⋆.𐙚 ̊ accounting [chapter three]: analyzing business transactions

transactions

events that change the company’s assets, debts, or equity (ex: buying supplies, getting a loan, paying workers)

are all activities transactions?

no, not all activities are transactions (ex: hiring a worker is not a transaction until you pay them)

factors that shape the accounting system

1.) type of business

2.) types of transactions

3.) company size

4.) amount of data

5.) what managers/others need to know

decision process

ask: did it change assets, liabilities, or equity?

if yes, record it, if not, don’t

what equation will you be using to analyze transactions?

assets = labilities + stockholder’s equity

double-sided effect

every transaction changes at least two sides

what could happen if one asset goes up?

a. another asset goes down

b. liability goes up

c. equity goes up

summaries of transactions

a. each transaction is shown with effects on assets, liabilities, and equity

b. both sides must stay equal

c. show the cause for changes in revenues or expenses