Accounting - Lesson 3 : The Business Transactions

Accounting - Lesson 3 : The Business Transactions

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  Welcome, dear Students “Account Double – any Trouble” Accounting course for Beginners www.elearningpower.com
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  Lesson 3 LearningObjectives 1 Business Transactions 2 Four transactions that effect Balance Sheet 3 Four Transactions that effect Income statement
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  Lesson 3 :What You’ll Learn WHAT IT IS IMPORTANT WHAT IS NEEDED UNDERSTAND Owner’s equity is changed Accounts are used to analyze by revenue, expenses, business transactions. investments, and Accounts receivable is the total amount withdrawals. of money owed to a business Accounts payable is the amount owed, How revenue and or payable, to the creditors of a business. expenses affect owner’s equity. How businesses use accounts. How withdrawals affect The steps used to analyze owner’s equity. a business transaction.
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  Key Terms : business transaction  revenue  account  expense  accounts receivable  withdrawal  accounts payable  investment  on account
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  Summary: Basic Questions What is my property ? • what are the sources of my business what a business owns what a business owes Am I successful in business? • What I have made - ​a profit or loss
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  Summary: Property (assets ) What is my property ? Property is anything of value that a person or business owns and therefore controls. Property is measured in dollars. In accounting, property appears in the records at the amount it cost the owner.
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  Summary: Financial Claims What are the sources of my business ? Financial claims are the legal rights to property. The term equities refers to the financial claims on assets (property). The two types of equities in a business are • creditors’ financial claims, called liabilities, and • the owner’s financial claims, called owner’s equity.
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  Summary: Do youremember ? The accounting equation is : ASSETS = LIABILITIES + OWNER’S EQUITY
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  Summary: Revenue and Expenses Revenue and Expenses Am I successful in business? • What I have made - ​a profit or loss ? Revenue Expenses How to find out ? 5 - Compare Revenue and Expenses 4 Revenue is income from the sale of goods and services. 3 Examples of revenue are fees earned for services performed and cash received from the sale of merchandise 2 To generate revenue most businesses must also incur 1 expenses to buy goods, materials, and services. 0 An expense is the cost of products or services used to operate a business. Examples of business expenses Category Category Category are 1 2 Category 3 4 • rent, • utilities, and • advertising.
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  Most businesses havethe following types of transactions: Summary: Business Transactions investments by the owner withdrawals by the owner credit transactions revenue and expense transactions A business transaction is an economic event that causes a change - either an increase or a decrease - in assets, liabilities, or owner’s equity.
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  Two Main FinancialStatements Balance Sheet The main purpose of the balance sheet is to report the assets of the business and the claims against those assets on a specific date . The balance sheet summarizes the following Income Statement information: The income statement reports the revenues and expenses for a period of time The excess of the revenue over the expenses is called net income or net profit. If the expenses exceed the revenue, the excess is a net loss. Am I successful in business? What a business owns and owes ? What is business worth ?
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  Summary: Business transactions inside- Balance Sheet There are four main types of transactions between + assets and liabilities (and capital) on the balance Liabilities sheet to be remembered: (and Capital) + _ Assets Liabilities 1. + Assets + Liabilities (Capital) 2. + Assets - Assets _ 3. - Liabilities - Assets Assets 4. - Liabilities + Liabilities
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  Summary: Business transactions between- Balance Sheet + and Income Statement Liabilities _ There are four main types of transactions between Balance and Income Statement (and capital) to be Liabilitie remembered: s + + Revenues Expenses _ 1. - Assets + Expenses (Withdrawals) Assets 2. + Liabilities + Expenses + 3. + Assets + Revenue 4. - Liabilities + Revenue Assets
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  8 Basic BusinessTransactions Balance Sheet Income Statement Nothing is so important in accounting as learn eight basic business transactions. If you can not, you have never learned accounting. +Assets +Liabilities +Expenses 1. + Assets + Liabilities (+Capital) 2. + Assets - Assets 3. - Liabilities - Assets -Assets -Liabilities +Revenue 4. - Liabilities + Liabilities 5. - Assets + Expenses (Withdrawals) 6. + Liabilities + Expenses 7. + Assets + Revenue 8. -Liabilities +Revenue
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  Summary: Use thefollowing steps to analyze a business transaction: Step 1 • Identify the accounts affected. Step 2 • Classify the accounts affected. Step 3 • Determine the amount of increase or decrease for each account affected. Step 4 Make sure the accounting equation remains in balance.
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  Follow next Lesson Thankyou ! Lesson 4 : Transactions that effect Assets, Liabilities and Owner’s Capital Enroll NOW For full version with lecturer www.elearningpower.com