The document discusses accounting transactions and how the accounting equation of assets equals liabilities plus owner's equity must remain balanced after each transaction. It provides examples of common business transactions like purchasing supplies or equipment, providing services to customers, paying expenses, and owner investments and withdrawals. The accounting process of analyzing transactions and their impact on accounts is demonstrated through a sample scenario of transactions for a new business.

1. ACCOUNTING BASIS
Lecture 4
Accounting for business transactions

2. ACCOUNTING EQUATION
Assets = Liabilities + Equity
Liabilities
Assets & Equity

3. TRANSACTION ANALYSIS EQUATION
The accounting equation MUST remain in balance after
each transaction.
Assets = Liabilities + Equity

4. What is a business
transaction?
A business transaction is any economic event that
affects to financial position of the business and can
be measured reliably.

5. TRANSACTIONS AND EVENTS
 Exchangesof economic consideration
between two parties.
External Transactions
occur between the
organization and an
outside party.
Internal Transactions
occur within the
organization.

6. Owners’
Assets = Liabilities + Equity
-Owner’s
withdrawal
+Revenue -Expenses
The
Accounting
Equation
A = L + OE

7. Different procedure for accounting
equation
• A=L+O.E
• L= A- O.E
• O.E= A- L
•Expenses are always less from
owner’s equity
•Revenues are always add to
owner’s equity

8. Transaction analysis

9.  On December 1, Chuck Taylor
forms an athletic shoe consulting
business. He sets it up as a
Co.ltd..

10. TRANSACTION ANALYSIS – 1
 Taylor personally invests $30,000 cash in the new
company, the cash in a bank account opened under
the name of FastForward, Inc.

11. Chuck Taylor invests $30,000 in the
1 company .
The accounts involved are:
-Cash /Asset/
-Owner’s Equity

12. Chuck Taylor invests $30,000 in the
1 company .
Assets = Liabilities + O/Equity
Accounts Notes
Cash Supplies Equipment Payable Payable O/Equity
(1) $ 30,000 $ 30,000
$ 30,000 $ - $ - $ - $ - $ 30,000
$ 30,000 = $ 30,000

13. FastForward purchases $2,500 of
2 supplies for cash.
The accounts involved are:
- Supplies / Asset/
- Cash / Asset/

14. FastForward purchases $2,500 of
2 supplies for cash.
Assets = Liabilities + Equity
Accounts Notes
Cash Supplies Equipment Payable Payable Equity
(1) $ 30,000 $ 30,000
(2) (2,500) 2,500
$ 27,500 $ 2,500 $ - $ - $ - $ 30,000
$ 30,000 = $ 30,000

15. FastForward purchases $26,000
3 equipment for testing athletic shoes.
The accounts involved are:
- Equipment / Asset/
- Cash / Asset/

16. FastForward purchases $26,000
3 equipment for testing athletic shoes.
Assets = Liabilities + Equity
Accounts Notes
Cash Supplies Equipment Payable Payable Equity
(1) $ 30,000 $ 30,000
(2) (2,500) 2,500
(3) (26,000) 26,000
$ 1,500 $ 2,500 $ 26,000 $ - $ - $ 30,000
$ 30,000 = $ 30,000

17. FastForward purchased $7,100 of
4 supplies on credit.
The accounts involved are:
- Supplies / Asset/
- Account payable / Liabilities/

18. FastForward purchased $7,100 of
4 supplies on credit.
Assets = Liabilities + Equity
Accounts Notes
Cash Supplies Equipment Payable Payable Equity
(1) $ 30,000 $ 30,000
(2) (2,500) 2,500
(3) (26,000) 26,000
(4) 7,100 7,100
$ 1,500 $ 9,600 $ 26,000 $ 7,100 $ - $ 30,000
$ 37,100 = $ 37,100

19. FastForward provides consulting
5 services to an athletic club and
collects $4,200 in cash.
The accounts involved are:
- Cash / Asset/
- Service revenue / Owner’s equity/

20. FastForward provides consulting
5 services to an athletic club and
collects $4,200 in cash.
Assets = Liabilities + Equity
Accounts Notes
Cash Supplies Equipment Payable Payable Equity
(1) $ 30,000 $ 30,000
(2) (2,500) 2,500
(3) (26,000) 26,000
(4) 7,100 7,100
(5) 4,200 4,200
$ 5,700 $ 9,600 $ 26,000 $ 7,100 $ - $ 34,200
$ 41,300 = $ 41,300

21. FastForward pays $1,000 rent of the
6 building where its store is located.
The accounts involved are:
- Rent expense / Owner’s Equity/
- Cash / Asset/

22. FastForward pays $1,000 rent of the
6 building where its store is located.
Assets = Liabilities + Equity
Accounts Notes
Cash Supplies Equipment Payable Payable Equity
(1) $ 30,000 $ 30,000
(2) (2,500) 2,500
(3) (26,000) 26,000
(4) 7,100 7,100
(5) 4,200 4,200
(6) (1,000) (1,000)
$ 4,700 $ 9,600 $ 26,000 $ 7,100 $ - $ 33,200
$ 40,300 = $ 40,300

23. FastForward pays the biweekly
7 $700 salary of the company’s only
employee.
The accounts involved are:
- Salary expense / Owner’s Equity/
- Cash / Asset/

24. FastForward pays the biweekly
7 $700 salary of the company’s only
employee.
Assets = Liabilities + Equity
Accounts Notes
Cash Supplies Equipment Payable Payable Equity
(1) $ 30,000 $ 30,000
(2) (2,500) 2,500
(3) (26,000) 26,000
(4) 7,100 7,100
(5) 4,200 4,200
(6) (1,000) (1,000)
(7) (700) (700)
$ 4,000 $ 9,600 $ 26,000 $ 7,100 $ - $ 32,500
$ 39,600 = $ 39,600

25. FastForward provides consulting
8 services of $1,600 on account.
The accounts involved are:
- Accounts receivable / Asset/
- Service revenue / Owner’s equity/

26. FastForward provides consulting
8 services of $1,600 on account .
Assets = Liabilities + Equity
Accounts Accounts Notes
Cash Rec Supplies Equipment Payable Payable Equity
(1) $ 30,000 $ 30,000
(2) (2,500) 2,500
(3) (26,000) 26,000
(4) 7,100 7,100
(5) 4,200 4,200
(6) (1,000) (1,000)
(7) (700) (700)
(8) 1,600 1,600
$ 4,000 $ 1,600 $ 9,600 $ 26,000 $ 7,100 $ - $ 34,100
$ 41,200 = $ 41,200

27. The client in transaction 8 pays $1,600
9 to FastForward.
The accounts involved are:
- Cash / Asset /
- Accounts receivable / Asset /

28. The client in transaction 8 pays $1,900
9 to FastForward.
Assets = Liabilities + Equity
Accounts Accounts Notes
Cash Rec Supplies Equipment Payable Payable Equity
(1) $ 30,000 $ 30,000
(2) (2,500) 2,500
(3) (26,000) 26,000
(4) 7,100 7,100
(5) 4,200 4,200
(6) (1,000) (1,000)
(7) (700) (700)
(8) 1,600 1,600
(9) 1,600 (1,600)
$ 5,600 $0 $ 9,600 $ 26,000 $ 7,100 $ - $ 34,100
$ 41,200 = $ 41,200

29. FastForward pays $900 to CalTech
10 Supply as partial payment for its
earlier $7,100 purchase of supplies.
The accounts involved are:
- Accounts payable / Liabilities /
- Cash / Asset /

30. FastForward pays $900 to CalTech
10 Supply as partial payment for its
earlier $7,100 purchase of supplies.
Assets = Liabilities + Equity
Accounts Accounts Notes
Cash Rec Supplies Equipment Payable Payable Equity
(1) $ 30,000 $ 30,000
(2) (2,500) 2,500
(3) (26,000) 26,000
(4) 7,100 7,100
(5) 4,200 4,200
(6) (1,000) (1,000)
(7) (700) (700)
(8) 1,600 1,600
(9) 1,600 (1,600)
(10) (900) (900)
$ 4,700 $0 $ 9,600 $ 26,000 $ 6,200 $ - $ 34,100
$ 40,300 = $ 40,300

31. Owner withdrawal $600 cash for
11 personal needs.
The accounts involved are:
- Owner’s withdrawal /Owner’s equity/
- Cash / Asset /

32. Owner withdrawal $600 cash for
11 personal needs.
Assets = Liabilities + Equity
Accounts Accounts Notes
Cash Rec Supplies Equipment Payable Payable Equity
(1) $ 30,000 $ 30,000
(2) (2,500) 2,500
(3) (26,000) 26,000
(4) 7,100 7,100
(5) 4,200 4,200
(6) (1,000) (1,000)
(7) (700) (700)
(8) 1,600 1,600
(9) 1,600 (1,600)
(10) (900) (900)
(11) (600) (600)
$ 4,100 $0 $ 9,600 $ 26,000 $ 6,200 $ - $ 33,500
$ 39,700 = $ 39,700

33. ACCOUNTING TRANSACTIONS
On march 1, 2011, David opened his business . During the
march , the business engaged in the following transactions.
-David invested $20,000 of personal cash to start the business.
- The business purchased equipment for $8000.
- The business purchased Goods costing $12,000 on account.
- The business sold goods costing $6000 for $8500 .
- The business purchased supplies for $800.
- The business paid for rent $600.
- The business paid for salary $900.
- The business sold goods costing $4000 for $5300 on account.
- The business withdrew $500 for personal use.