المساعد الشخصي الرقمي

مشاهدة النسخة كاملة : Transaction Analysis and the Accounting Equation



محاسب متخصص
09-01-2014, 07:16 AM
Accounting Equation:-


Assets = Liabilities + Equity
 Assets are resources a company owns or controls. Examples instruments, lands, cars and furniture


Liabilities are creditors’ claims on assets.


Equity is the owner’s claim on assets. Equity is equal to assets minus liabilities. This is the reason equity is also called net assets or residual equity.


Equity is called owner’s equity—increases and decreases as follows:-



Owner investments are assets an owner puts into the company and are included under the generic account Owner, Capital.


Revenues are sales of products or services to customers. Revenues increase equity
Owner withdrawals are assets an owner takes from the company for personal use. Owner withdrawals decrease equity


Expenses are the costs necessary to earn revenues. Expenses decrease equity. Examples :- use of supplies, and advertising, utilities, and insurance services from others.


This breakdown of equity yields the following expanded accounting equation.




Net income occurs when revenues exceed expenses. Net income increases equity.
A net loss occurs when expenses exceed revenues, which decreases equity


Transaction Analysis


The effect of transactions and events on Accounting Equation


Transaction 1: Investment by Owner
On December 1, Chas Taylor forms a consulting business, named FastForward and set up as a proprietorship


Taylor personally invests $30,000 cash in the new company and deposits the cash in a bank account








Transaction 2: Purchase Supplies for CashFastForward uses $2,500 of its cash to buy supplies of brand name footwear for performance testing over the next few months.