The

Transaction
Analysis
Sheet
The Transaction Analysis Sheet
The goal of this section is to learn how various
transactions can affect and change the financial
position of a company.
One of the ways that transactions can be
examined is by using a “Transaction Analysis
Sheet”.
It is vital that you remember the fundamental
accounting equation:
A = L + OE (Assets = Liabilities + Owner’s Equity)
when completing the Transaction Analysis Sheet.
 The Transaction Analysis Sheet
First let’s look at a simplified Balance Sheet for ABC Bike Cabs. The
Balance sheet is needed to gain the beginning balances for each account.
 The Transaction Analysis Sheet
• As transactions occur, the balances of some or all of the accounts in
the Balance Sheet can be affected.
• A transaction analysis sheet should be used when studying and
recording changes in a business’s financial position. This sheet is built
in the same way as the fundamental accounting equation.
A= L + OE
 The Transaction Analysis Sheet
Here are some transactions that affect the financial position of ABC Bike Cabs:

Transaction 1:
ABC Bike Cabs pays $100 cash to Joe’s Bike Repair (creditor).

•The amounts for Cash and Accounts Payable are updated:

•Cash is decreased by $100.
•Debt owed to Joe’s Bike Repair is decreased by $100.
•The amounts for the other items remain unchanged.

After the changes are recorded and the new totals determined,
the equation is still in balance. This is very important!
The Transaction Analysis Sheet
Transaction Analysis Sheet after Transaction 1:
The Transaction Analysis Sheet
Transaction 2:
The Belair Hotel, who owes ABC Bike Cabs $50.00, pays $25.00 in
partial payment of its debt.

• Cash is increased by the amount received: $25.00.

• Accounts Receivable - Belair Hotel is decreased by $25.00 but
$25.00 is still owing on the debt.

After the changes are recorded, the equation is still in balance.

The Transaction Analysis Sheet
After Transaction 2, the Transaction Analysis Sheet will look as follows:
The Transaction Analysis Sheet
Transaction 3:
Additional safety equipment costing $200.00 is purchased for cash.

• Cash is decreased by the amount paid, $200.00.

• Equipment is increased $200.00.

After the changes are recorded, the equation is still in balance.

The Transaction Analysis Sheet
After Transaction 3, the Transaction Analysis Sheet will look as follows:
The Transaction Analysis Sheet
Transaction 4:
A new bike cab is purchased at a cost of $1000.00. ABC Bike Cabs
pays $200.00 cash and arranges a loan from Bank of Mom to cover
the balance of the purchase price.

• Cash is decreased by the amount paid: $200.00.

• Bike Cabs is increased by the cost of the new cab: $1,000.00.
• The liability to Bank of Mom is increased by the additional amount
borrowed, $800.00.

After the changes are recorded, the equation is still in balance.

 The Transaction Analysis Sheet
After Transaction 4, the Transaction Analysis Sheet will look as follows:
The Transaction Analysis Sheet
Transaction 5:
ABC Cabs has an extremely busy day when a cruise ship stops at
the town dock. The two cabs earned $2500.00 in fees for the day.
Most clients paid cash for cab rides to the downtown shopping
district. Some customers, however, bought a package deal from Big
Bear Marina for a meal and bike cab tour. Big Bear Marina will pay
those fees (totaling $900.00) within 30 days.

• Cash is increased by $1600.00

• Big Bear Marina owes $900 more to ABC Bike Cabs and therefore
the accounts receivable figure for Big Bear Marina is increased by
$900.00.
• No other asset or liability is affected.
• Jon King’s capital is increased by $2500.00.

After the changes are recorded, the equation is still in balance.

The Transaction Analysis Sheet
After Transaction 5, the Transaction Analysis Sheet will look as follows:
The Transaction Analysis Sheet
Transaction 6:
Jon King, the owner, withdraws $1000 for personal use.

• Cash is decreased by $1000, the amount withdrawn.

• No other asset or liability is affected.
• Jon King, Capital is decreased by $1 000.

After the changes are recorded, the equation is still in balance.

The Transaction Analysis Sheet
After Transaction 6, the Transaction Analysis Sheet will look as follows:
 A New Balance Sheet
Once all of the transactions have been completed, the Balance Sheet
can then be updated using the balances at the end of the
Transaction Analysis Sheet.
 The Transaction Analysis Sheet
You will notice that there is a “Zero Proof” column at the end of the table.
This column is used to ensure that the accounting equation stays in balance
after each transaction. Remember the fundamental accounting equation:
Assets = Liabilities + Owner’s Equity. A=L+OE If you move the L and OE to
the other side of the equation, you would get A – L – OE = 0. In other words
when you subtract the liabilities and owner’s equity from the assets you get
ZERO – which “proves” your transactions are balanced.
The Zero Proof column
uses this equation
A-L-OE=0
to verify that transactions
are balanced.

Study the formula for Zero

Proof in cell AD8 to see
how to enter the function. The formula for Zero Proof in cell AD8 is
Add the Assets, subtract
the Liabilities & Owner’s =SUM(U8:Y8)-SUM(Z8:AB8)-AC8
Equity.