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Accounting for a Service Business
Unit 1.3
Transactions
What is a Transaction?
An event that occurs during the operation of a business and results in a financial change
A business transaction always includes an exchange of value
Something of value is given
Something of value is received
Transaction
Transaction Analysis
Using the totals from a Balance Sheet, transactions can be examined and their effects will be immediately reflected on the net worth of a business
Transactions usually take place between accounting periods The period of time covered by an accounting
statement
Questions to ask regarding a transaction…
Which items change in value as a result of the transaction? At least two accounts must be affected in order
for a transaction to be validHow much do these items change?Do the items increase or decrease in
value?After the change is recorded, does the
balance sheet equation still balance?
Transaction Analysis Template
Found on the Share DrivePrint out a copy to fill in the numbers
manually or input the numbers directly on the computer
Use the latest Balance Sheet to create the Opening Balance
Goldman Gym – Transaction Analysis
Transaction 1 Purchased new training equipment for $500
cash Training Equipment will increase by $500 Cash will decrease by $500
Cash now has a balance of $4,500 Equipment now has a balance of $95,000
Assets still equal Liabilities plus Equity
Goldman Gym – Transaction Analysis
Transaction 2 Purchased office supplies for $55, on credit,
from Central Supply Co. Office Supplies increase by $55 Money owed (Accounts Payable) increases by $55
Office Supplies now has a balance of $555 Accounts Payable now has a balance of $4,055
Assets still equal Liabilities plus Equity
Goldman Gym – Transaction Analysis
Transaction 3 Received $3,000 from customers who owed
money to the business Cash balance increases by $3,000 Accounts Receivable (money owed from customers)
decreases by $3,000
New Cash balance is $7,500 New Accounts Receivable balance is $3,000
Assets still equal Liabilities plus Equity
Goldman Gym – Transaction Analysis
Complete the remaining transactions (page 18) yourself
As a hint…Total Assets = $242,480 at the end of the exercise
Preparing a New Balance Sheet
Transfer the new balances from the transaction analysis sheet to a new balance sheet
Make sure the date reflects the changes in the account balances