ACCTG 101

Chapter 6: Business Transactions & Their Analysis

Learning Objectives
1. Describe the nature and give examples of business transactions.
2. Identify the different types of business documents.
3. Analyse common business transactions using the rules of debit and credit.

Steps in the Accounting Cycle

1. Identifying and Analyzing
 Identifying and Analyzing Transactions and Events
 Only accountable events are recorded. Accountable events are those that affect the
assets, liabilities, equity, income or expenses of the business.
 Accountable events are normally identified from source documents, such as sales
invoice, official receipts, delivery receipts, and the like.
o Types of Events
 External events – are transactions that involve the business and another external
party.
 Internal events – are events that do not involve an external party.

2. Journalizing - refers to recording an identified accountable event in the journal by means of a

journal entry.

3. Posting
4. Unadjusted Trial Balance
5. Adjusting Entries
6. Adjusted Trial Balance (and/or Worksheet)
7. Financial Statements
8. Closing Entries
9. Post-closing Trial Balance
10. Reversing Entries

Simple and Compound journal Entries

Simple Journal Entry – contains a single debit and a single credit element.
Compound Journal Entry – contains two or more debits or credits.