Transaction Analysis.

Objective 6

Accounting for Business Transactions What is a transaction? It is any event that both affects the financial

position of the business and can be reliably recorded.

Accounting for Business Transactions1 Gay Gillen invests $30,000 to begin Gay

Gillen eTravel.2 Gillen purchases an office location, paying

$20,000 in cash.3 She buys office supplies, agreeing to pay

$500 in 30 days.4 She earns and collects $5,500 revenues.

Accounting for Business Transactions5 Gillen performs services, and the client

agrees to pay $3,000 within one month.6 During the month, she pays $3,300 for

expenses incurred.7 Gillen pays $300 to the store from which she

purchased $500 worth of supplies. What is the effect of these transactions on

the accounting equation?

Owner’s Assets = Liabilities + Equity

1) Cash + $30,000 + $30,0002) Cash – 20,000

Land + 20,0003) Supplies + 500 + 5004) Cash + 5,500 + 5,5005) Receivable + 3,000 + 3,0006) Cash – 3,300 – 3,3007) Cash – 300 – 300 Totals + $35,400 + 200 + $35,200

Accounting for Business Transactions

Accounting for Business Transactions Notice that the equation always stays in

balance. Each transaction affects at least two

accounts, sometimes more. Some transactions affect only one side of

the equation; some affect both sides.

Accounting for Business Transactions Other transactions that took place were as

follows: The business collected $1,000 from the

client. She withdrew $2,000 from the business.

End of Chapter 1