3. Analyzing and summarizing business transactions
3.1 Definitions of business transactions and source documents
3.2 Summary of business activities (financing, investing, operating)
3.3 The accounting equation
3.4 Analyzing and accounting for business transactions
3.5 Presentation of results of routine transactions by preparing the Basic Income Statement, Owner’s Equity Statement, Balance Sheet, and Statement of Cash Flows
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Economic Events
The first objective of any accounting system is to identify the economic events that can be expressed in financial terms by the system.
Economic Event – is any event that directly affects the financial position of the company. In other words, this means any business transaction or financial affair of the company...read moreBusiness transactions
A Business Transaction is exchanging of values between transacting persons/parties.
Exchange of values means that one value is received in return or in exchange for another value parted with...read moreSource Documents
Source Documents are the forms, invoices, receipts, legal papers, or other documents which underlie a business transaction. These are the so-called evidential matter. Existence of evidential matter supports and corroborates the objectivity of accounting records...read moreVaried Forms of Values
Again, a business transaction is an exchange of values. There's a give and take in a business transaction. There are two items that must be considered and analyzed in a business transaction, the value received and the value parted with...read moreSummary of business activities
The Operating Activities are those business transactions which generates revenue for the organization. These include expenses incurred to produce revenues.
The following are the transactions included under the operating activities...read more
The main purpose of investing activities is to acquire assets in order to facilitate and expedite the operations of the business.
The Investing Activities are those transactions which involve acquisition and disposal of assets other then inventory, which are necessary in the business operations...read more
The Financing Activities are those transactions between the entity and its owners or creditors.
The primary focus of financing activities is to raise working capital necessary to be used in business operations. The owners invest to the entity and/or creditors lend capital to the entity...read moreThe accounting equation
In the point of view of Financial Position, the accounting equation underlies the processes used to capture the effect of economic events.
This equation generally portrays the equality between the economic resources of entities and the claims to these resources. Meaning, the resources of entities are provided by creditors and owners...read moreAnalyzing and accounting for business transactions
Analyzing and accounting for business transactions, one has to acquire ability to recognize the dual effects of each transaction has on the accounting equation...read morePresentation of results of routine transactions by preparing the Basic Income Statement, Owner’s Equity Statement, Balance Sheet, and Statement of Cash Flows
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