1: Transaction Analysis Balance Sheet Transactions MBADM 811: Lesson 2 SU19

transaction analysis accounting

The third-party liability would not have any interest cost, but had a $500 late payment fee per month for payments received after the due date. Before the end of the year, a Mrs. Hughes and four other parents came to Chang’s office. They had heard about the initiative and student achievements to date. They wanted to enroll their children in the tutoring program starting January 2016. They knew they would not be able to pay the full cost of PASS’s tutoring services.

How scripts are formed?

A script decision is made when a person discounts his own free child needs in order to survive, to maintain attachment to a caregiver. After numerous discounts the decision becomes something that is no longer consciously chosen, it becomes part of the script.

Historically, 1.5 percent of all pledges have been uncollectible. Most non-profit managers aren’t so lucky. Virtually all non-profits have some sort of restrictions on when and how their organization can spend money. Donors who want to ensure the organization accomplishes specific goals will restrict how and when their donation can be spent. Governments do the same with restricted grants or loans. Some resources, namely endowments, can’t ever be spent.

6: Transaction Analysis and Double-entry Accounting

One of the big financial questions for any non-profit is how much control does it have over where its money comes from and where its money goes? In a perfect world, non-profit managers would fund all their operations through unrestricted program revenues and donations. It’s much easier to manage an organization when there are no strings attached to its money. The matching principle is much more applicable when the transaction in question involves a good rather than a service.

transaction analysis accounting

Paid monthly salary of $3,000 to employee. Every transaction’s net amount on the left side of the equation must equal the net amount on the right side. The first transaction increases both the cash and the common stock of the business.

What are the steps of transaction analysis?

The balance of Accounts Receivable shows the amount due from customers. Accounts Payable shows how much the business owes suppliers on open account, and so on. In the phrase “keeping the books,” books refers to the accounts in the ledger. In most accounting systems, the ledger is computerized. Exhibit 2-8 shows how the asset, liability, and stockholders’ equity accounts are grouped in the ledger. The purchase increases one asset and decreases another asset by the same amount. After the transaction is completed, Genie has cash of $10,000, land of $40,000 and no liabilities.

  • In financing activities, we actually have two transactions that have financing activities.
  • The values from previous transactions remain in their places.
  • To help find the accounts later, they are usually organized into assets, liabilities, equity, revenues, and expenses .
  • Service Revenue has also increased.
  • Revenues and expenses affect the income statement.
  • Looking at Exhibit 2-16 (p. 112), an increase in expenses is a debit, while a decrease in an asset is a credit.

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.

Transaction Analysis and the Accounting Equation

Therefore, the company has a liability to the customer to provide the service and must record the liability as unearned revenue. The liability of $4,000 worth of services increases because the company has more unearned revenue than previously. Total increase in assets amounts to $3,500, total increase in liabilities amounts to $3,500. There is an equality, therefore the transaction was recorded correctly. There is an exchange of one type of the asset into another.

transaction analysis accounting

Paid cash for a Dell computer, $3,000, with the computer expected to remain in service for 5 years. Purchased office furniture on account, $6,000, with the furniture projected to last for 5 years.

Ch 1 Exersice transaction analysis

When you analyze an accounting transaction, you’re determining how that transaction affects the basic accounting equation. Both sides of this equation must always balance, which is reflected on your company’s balance sheet. Under the second transaction the company Zeta acquires office space, which will be rented out to the clients. Part of the cost was paid by cash – $3,500, another part will be paid after some period of time, i.e. part of the office space was acquired on credit, i.e. $3,500. On the left side of the equation we have increase in Assets, i.e. cash in bank by $14,000 and petty cash by $5,000. We need to separate petty cash and cash bank to reflect impact of the transaction on the different types of assets.

  • Total amount invested by shareholders is $19,000, which is reflected on the right side as an increase in Owners’ Equity.
  • Increases in assets are recorded on the left side of the account.
  • Requirement 4 Prepare the trial balance of Aikerman Consulting Corp. at June 30, 2009.
  • Since assets and equity both increase by the same amount, the accounting equation stays in balance.
  • Performed service for FedEx on account, totaling $1,200.

This is also known asdouble-entry bookkeeping. Contrast the recognition concepts in accrual accounting with cash accounting and fund accounting. Provides $5,500 in services to a customer who asks to be billed for the services. Presented here are the accounts of H ometown Décor Company for the year ended December 31, 2018.


Which of these statements is false? Increases in liabilities and decreases in revenues are recorded what is a transaction analysis with a debit. Increases in assets and decreases in stockholders’ equity are recorded with a debit.

  • The business provided $2,600 of services to a customer on account.
  • The business paid office rent of $4,000.
  • Which of these statements is correct?
  • To begin operations, Michael deposited $10,000 cash in the business’s bank account.
  • The journal gives more information than a ledger account provides because it shows the complete effect of each transaction, not just one part of it.

Paying the business bills affects your expense accounts. This transaction decreases one type of asset by $5,000, increases another type of asset by $15,000, and increases a liability by $10,000. The journal is a chronological record of all company transactions listed by date. But the journal does not indicate how much cash or accounts receivable the business has. The ledger is a grouping of all the T-accounts, with their balances. For example, the balance of the Cash T-account shows how much cash the business has.

Subledger Accounting Transaction Analysis Duty

The income statement would see an increase to revenues, changing net income . Remember that the accounting equation must remain balanced, and assets need to equal liabilities plus equity. On the asset side of the equation, we show an increase of $20,000. On the liabilities and equity side of the equation, there is also an increase of $20,000, keeping the equation balanced. Changes to assets, specifically cash, will increase assets on the balance sheet and increase cash on the statement of cash flows. Changes to stockholder’s equity, specifically common stock, will increase stockholder’s equity on the balance sheet.

Most of the times, Paul works by himself but when he gets overwhelmed, he calls one or more former colleagues to come and help. This includes some jobs he is not specialized in but would not want to direct the customers to another shop. Employees are paid monthly on the 7th of the following month. Chang had also worked really hard in the initial month and submitted a grant proposal to the McNamara Foundation. After an intensive vetting process, she received the news that the Foundation would support PASS efforts in closing the achievement gap. She received a check from the foundation in April for $25,000.