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FINANCIAL  ACCOUNTING  BASICS
[object Object],[object Object],[object Object],[object Object],[object Object]
G.  TRANSACTION ANALYSIS ,[object Object],[object Object],[object Object],A  =  L  +  E   Sample Transaction 1. + + ,[object Object],[object Object],[object Object],[object Object],2. + + ,[object Object],[object Object],3. +,  - ,[object Object],[object Object],[object Object],[object Object]
G.  TRANSACTION ANALYSIS (cont) A  =  L  +  E  Sample Transaction 5. - - ,[object Object],[object Object],6. + - ,[object Object],[object Object],[object Object],4. - - ,[object Object],[object Object],[object Object],[object Object],7. - + ,[object Object],[object Object],[object Object]
G.  TRANSACTION ANALYSIS (cont) Combinations 1 – 5 are most common; 6 – 9 are rare A  =  L  +  E   Sample Transaction Next, we will analyze the effect that each of a series of transactions has on a company’s balance sheet. 8. +, - ,[object Object],[object Object],[object Object],[object Object],9. +, - ,[object Object],[object Object]
H.  BALANCE SHEET CHANGES ABC Company Balance Sheet January 2, Year 1 Assets Liabilities and Equity   Assets Liabilities and Equity   Cash $ 10,000   Paid-in capital $ 10,000   Total $10,000 Total $10,000   2.  On January 3, ABC Company borrows $5,000 from Multi Bank.   ABC Company Balance Sheet January 3, Year 1 Cash $ 15,000   Note payable $  5,000   Paid-in capital   10,000 Total $15,000 Total $15,000 ,[object Object]
H.  BALANCE SHEET CHANGES (cont) ,[object Object],ABC Company Balance Sheet January 5, Year 1 Assets Liabilities and Equity   Inventory   8,000   Accounts payable $  8,000   Cash $15,000   Total $23,000   Note payable   5,000  Paid-in capital   10,000 Total $23,000 ,[object Object],[object Object],ABC Company Balance Sheet January 9, Year   1 Assets Liabilities and Equity Cash $17,500   Note payable   5,000  Accounts payable $  8,000 Paid-in capital   10,000 Retained earnings    500   Total $23,500 Inventory   6,000   Total $23,500
H.  BALANCE SHEET CHANGES (cont) 5.  On January 10, ABC Company pays for inventory purchased on January 5.   ,[object Object],[object Object],ABC Company Balance Sheet January 12, Year 1 ABC Company Balance Sheet January 10, Year 1 Assets Liabilities and Equity Assets Liabilities and Equity Cash $   9,500   Inventory   6,000   Total $15,500   Note payable $  5,000   Paid-in capital   10,000 Retained earnings    500   Total $15,500   Cash $  9,500 Accts receivable   5,000   Inventory   2,000 Total $16,500 Note payable $  5,000 Paid-in capital  10,000 Retained earnings    1,500 Total $16,500
H.  BALANCE SHEET CHANGES (cont) 7. On January 31, ABC Company collects the account receivable in cash.   ABC Company Balance Sheet January 31, Year 1 Assets Liabilities and Equity Cash $14,500 Inventory   2,000 Total $16,500 Note payable $  5,000 Paid-in capital  10,000 Retained earnings    1,500 Total $16,500
I.  ACCOUNTING CONVENTIONS 1.  Preparing a new balance sheet after each transaction is cumbersome. 2.  Instead, changes in balance sheet amounts are reflected in “accounts”. 3.  Any balance sheet account can be increased and decreased. 4.  Accountants often use “T accounts” to summarize the effects of transactions. 5.  The Cash T account for ABC Company is shown below.   +  Cash     - Balance, Jan 1 0 1.  Jan 2 10,000 2.  Jan 3 5,000 4.  Jan 9 2,500 8,000 5.  Jan 10 7.  Jan 31 5,000   22,500   8,000 Balance, Jan 31  14,500
I.  ACCOUNTING CONVENTIONS ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
PRACTICE EXERCISE ,[object Object],[object Object]
PRACTICE EXERCISE  (cont) Cash  Inventory  Note Payable   Paid-in Capital   Retained Earnings   Accounts Receivable   Accounts Payable End of Part Two

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Transaction analysis ppt @ BEC-DOMS

  • 2.
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  • 9. H. BALANCE SHEET CHANGES (cont) 7. On January 31, ABC Company collects the account receivable in cash. ABC Company Balance Sheet January 31, Year 1 Assets Liabilities and Equity Cash $14,500 Inventory 2,000 Total $16,500 Note payable $ 5,000 Paid-in capital 10,000 Retained earnings 1,500 Total $16,500
  • 10. I. ACCOUNTING CONVENTIONS 1. Preparing a new balance sheet after each transaction is cumbersome. 2. Instead, changes in balance sheet amounts are reflected in “accounts”. 3. Any balance sheet account can be increased and decreased. 4. Accountants often use “T accounts” to summarize the effects of transactions. 5. The Cash T account for ABC Company is shown below. + Cash - Balance, Jan 1 0 1. Jan 2 10,000 2. Jan 3 5,000 4. Jan 9 2,500 8,000 5. Jan 10 7. Jan 31 5,000 22,500 8,000 Balance, Jan 31 14,500
  • 11.
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  • 13. PRACTICE EXERCISE (cont) Cash Inventory Note Payable Paid-in Capital Retained Earnings Accounts Receivable Accounts Payable End of Part Two