Business Activities

Classification as to Business Core Operations

Activities of the organization depends with the industry it belongs. Different industries have their own sets of industrial core activities, the three most common of which are the following:

• Servicing

The primary product this business sells is the "services" it offers. 

In order to earn, those in this business renders services to its clients for a fee. 

• Merchandising

The primary product of this business is the "merchandise" items it sells.

This business in order to earn, the entity buys goods and adds markup or profit to the cost of goods then sells them to the customers.  In short, they are involve in buy-and-sell of merchandise.   

• Manufacturing

The primary product for this business is the goods they produce or manufacture.

This business buys raw materials then converts them into finished goods then sells them to customers at a selling price. 

Note that in the conduct of business, the entity must be viewed as a separate entity which means their transactions and activities are separate and distinct from that of the owners.

Classification as to Cash Transactions

Though various industries exist but the following economic activities are mutual to all:

• Operating activities

The Operating Activities are those business transactions which generates revenue for the organization. These include expenses incurred to produce revenues...read more 

• Investing activities

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

• Financing activities

The Financing Activities are those transactions between the entity and its owners or creditors...read more

Analyzing and summarizing business transactions

Here's the CMO3 S2007 outline for analyzing and summarizing business transactions

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 more

Business 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 more 

Source 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 more

Varied 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 more

Summary of business activities

• OPERATING

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

• INVESTING

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

• FINANCING

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 more

The 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 more 

Analyzing 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 more

Presentation of results of routine transactions by preparing the Basic Income Statement, Owner’s Equity Statement, Balance Sheet, and Statement of Cash Flows