THE BALANCE SHEET Business Transactions Unit 2

Business Transactions  Definition:  A business transaction is an exchange of things of value Something of value is givenis received

Business Transactions  Transaction Analysis Sheet  See page 19  For each transaction  Which accounts changed (must be at least 2)  How much do the accounts change  Increase or decrease  Is the equation still in balance?

Business Transactions For the following: which accounts, by how much, increase or decrease 1. Purchased $1200 in kitchen equipment. Paid $1000 in cash and $200 on credit 2. Received $2300 in cash from customers who owed money. 3. Owner invested an additional $3500 cash in the business 4. Borrowed $5000 cash from the bank

Business Transactions Last periods balance sheet Add transactions This periods balance sheet

Generally Accepted Accounting Principles (GAAP) Common set of rules Allows for comparisons and decision making Chapter 1 GAAP: 1. The Purpose of Accounting – To provide financial information for decision making 2. Business Entity Concept – Each business is a separate entity. Financial data for a business must be kept separate from the owner’s data 3. Cost Principle – Assets are shown at cost 4. Liquidity Order – Assets are shown in liquidity order 5. Maturity Date Rule – Liabilities are listed on the balance sheet according to the date they are to be paid

Business Transactions  Assignment  Do exercises 10,12-14 all parts  When done, check your work  Get it marked  Quiz – unit 1 and 2 on ________