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Chapter 1
THE ROLE OF
ACCOUNTING
IN DECISION
MAKING

Slide 1

Transaction analysis

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Accounting for business transactions

Let us solve now the
Transaction 1: Starting the business Classroom Activity
question 1
Transaction 2: Purchase of land
Transaction 3: Purchase of office supplies
Transaction 4: Earning of service revenue
Transaction 5: Earning of service revenue on credit
Transaction 6: Payment of expenses
Transaction 7: Payment of account
Transaction 8: Collection on account
Transaction 9: Sale of land
Transaction 10: Withdrawal of cash
Transaction 11: Personal transaction

Slide 3

Accounting for business transactions

Example for analysis of transaction (refer page 12)

Transaction Details of transactions

Starting the business
Purchase of land
Purchase of office supplies
Earning of service revenue
Earning of service revenue
on credit
Payment of expenses
Payment of account
Collection on account
Sale of land
Withdrawal of cash
Personal transaction
1 Sheena Bright invested $30,000 cash in the business
2 Paid$20,000 cash for land
3 Bought $500 of office supplies on credit
4 Received $5,500 cash from clients for service revenue earned
5 Performed training service for clients on credit, $3,000
6 Paid cash expenses: computer lease, $600: office rent $1,100; employee
salary $1,200; electricity and gas $400
7 Paid $300 on the account payable created in transaction 3
8 Collected $1,000 on the account receivable created in transaction 5
9 Sold land for cash at its cost of $9,000
10 Withdrew $2,000 cash for personal expenses
11 Remodelled Sheena Bright's personal residence. This is not a transaction of
the business

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Transaction Details of transactions

Starting the business 1 Sheena Bright invested $30,000 cash in the business
Purchase of land 2 Paid$20,000 cash for land
Purchase of office supplies 3 Bought $500 of office supplies on credit
Earning of service revenue 4 Received $5,500 cash from clients for service revenue earned
Earning of service revenue on credit 5 Performed training service for clients on credit, $3,000
Payment of expenses 6 Paid cash expenses: computer lease, $600: office rent $1,100; employee salary $1,200; electricity and gas $400
Payment of account 7 Paid $300 on the account payable created in transaction 3
Collection on account 8 Collected $1,000 on the account receivable created in transaction 5
Sale of land 9 Sold land for cash at its cost of $9,000
Withdrawal of cash 10 Withdrew $2,000 cash for personal expenses
Personal transaction 11 Remodelled Sheena Bright's personal residence. This is not a transaction of the business

Assets Owners´
Liabilities equity
Cash Land Office Accounts Accounts Sheena
supplies receivable payable Bright,
capital
(1) +30 000 (1) +30 000

Transaction Details of transactions

Starting the business 1 Sheena Bright invested $30,000 cash in the business
Purchase of land 2 Paid$20,000 cash for land
Purchase of office supplies 3 Bought $500 of office supplies on credit
Earning of service revenue 4 Received $5,500 cash from clients for service revenue earned
Earning of service revenue on credit 5 Performed training service for clients on credit, $3,000
Payment of expenses 6 Paid cash expenses: computer lease, $600: office rent $1,100; employee salary $1,200; electricity and gas $400
Payment of account 7 Paid $300 on the account payable created in transaction 3
Collection on account 8 Collected $1,000 on the account receivable created in transaction 5
Sale of land 9 Sold land for cash at its cost of $9,000
Withdrawal of cash 10 Withdrew $2,000 cash for personal expenses
Personal transaction 11 Remodelled Sheena Bright's personal residence. This is not a transaction of the business

Assets Owners´
Liabilities equity
Cash Land Office Accounts Accounts Sheena
supplies receivable payable Bright,
capital
(1) +30 000 (1) +30 000
(2) –20 000 (2) +20 000

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Transaction Details of transactions

Starting the business 1 Sheena Bright invested $30,000 cash in the business
Purchase of land 2 Paid$20,000 cash for land
Purchase of office supplies 3 Bought $500 of office supplies on credit
Earning of service revenue 4 Received $5,500 cash from clients for service revenue earned
Earning of service revenue on credit 5 Performed training service for clients on credit, $3,000
Payment of expenses 6 Paid cash expenses: computer lease, $600: office rent $1,100; employee salary $1,200; electricity and gas $400
Payment of account 7 Paid $300 on the account payable created in transaction 3
Collection on account 8 Collected $1,000 on the account receivable created in transaction 5
Sale of land 9 Sold land for cash at its cost of $9,000
Withdrawal of cash 10 Withdrew $2,000 cash for personal expenses
Personal transaction 11 Remodelled Sheena Bright's personal residence. This is not a transaction of the business

Assets Owners´
Liabilities equity
Cash Land Office Accounts Accounts Sheena
supplies receivable payable Bright,
capital
(1) +30 000 (1) +30 000
(2) –20 000 (2) +20 000
(3) +500 (3) +500

Transaction Details of transactions

Starting the business 1 Sheena Bright invested $30,000 cash in the business
Purchase of land 2 Paid$20,000 cash for land
Purchase of office supplies 3 Bought $500 of office supplies on credit
Earning of service revenue 4 Received $5,500 cash from clients for service revenue earned
Earning of service revenue on credit 5 Performed training service for clients on credit, $3,000
Payment of expenses 6 Paid cash expenses: computer lease, $600: office rent $1,100; employee salary $1,200; electricity and gas $400
Payment of account 7 Paid $300 on the account payable created in transaction 3
Collection on account 8 Collected $1,000 on the account receivable created in transaction 5
Sale of land 9 Sold land for cash at its cost of $9,000
Withdrawal of cash 10 Withdrew $2,000 cash for personal expenses
Personal transaction 11 Remodelled Sheena Bright's personal residence. This is not a transaction of the business

Assets Owners´
Liabilities equity
Cash Land Office Accounts Accounts Sheena
supplies receivable payable Bright,
capital
(1) +30 000 (1) +30 000
(2) –20 000 (2) +20 000
(3) +500 (3) +500
(4) +5 500 (4)+5 500

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Assets Owners´
Liabilities equity
Cash Land Office Accounts Accounts Sheena
supplies receivable payable Bright,
capital
(1) +30 000 (1) +30 000
(2) –20 000 (2) +20 000
(3) +500 (3) +500
(4) +5 500 (4)+5 500
(5) +3 000 (5) +3 000

Transaction Details of transactions

Starting the business 1 Sheena Bright invested $30,000 cash in the business
Purchase of land 2 Paid$20,000 cash for land
Purchase of office supplies 3 Bought $500 of office supplies on credit
Earning of service revenue 4 Received $5,500 cash from clients for service revenue earned
Earning of service revenue on credit 5 Performed training service for clients on credit, $3,000
Payment of expenses 6 Paid cash expenses: computer lease, $600: office rent $1,100; employee salary $1,200; electricity and gas $400
Payment of account 7 Paid $300 on the account payable created in transaction 3
Collection on account 8 Collected $1,000 on the account receivable created in transaction 5
Sale of land 9 Sold land for cash at its cost of $9,000
Withdrawal of cash 10 Withdrew $2,000 cash for personal expenses
Personal transaction 11 Remodelled Sheena Bright's personal residence. This is not a transaction of the business
Assets Owners´
Liabilities equity
Cash Land Office Accounts Accounts Sheena
supplies receivable payable Bright,
capital
(1) +30 000 (1) +30 000
(2) –20 000 (2) +20 000
(3) +500 (3) +500
(4) +5 500 (4)+5 500
(5) +3 000 (5) +3 000
(6) –3 300 (6) –3 300 *
* Various expenses – rent, salaries, lease, electricity and gas

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Transaction Details of transactions

Payment of expenses 6 Paid cash expenses: computer lease, $600: office rent $1,100;
employee salary $1,200; electricity and gas $400
Payment of account 7 Paid $300 on the account payable created in transaction 3
Collection on account 8 Collected $1,000 on the account receivable created in transaction 5
Sale of land 9 Sold land for cash at its cost of $9,000
Withdrawal of cash 10 Withdrew $2,000 cash for personal expenses
Personal transaction 11 Remodelled Sheena Bright's personal residence. This is not a transaction
of the business
Assets Owners´
Liabilities equity
Cash Land Office Accounts Accounts Sheena
supplies receivable payable Bright,
capital
(1) +30 000 (1) +30 000
(2) –20 000 (2) +20 000
(3) +500 (3) +500
(4) +5 500 (4)+5 500
(5) +3 000 (5) +3 000
(6) –3 300 (6) –3 300 *
(7) –300 (7) –300

Transaction Details of transactions

Payment of expenses 6 Paid cash expenses: computer lease, $600: office rent $1,100;
employee salary $1,200; electricity and gas $400
Payment of account 7 Paid $300 on the account payable created in transaction 3
Collection on account 8 Collected $1,000 on the account receivable created in transaction 5
Sale of land 9 Sold land for cash at its cost of $9,000
Withdrawal of cash 10 Withdrew $2,000 cash for personal expenses
Personal transaction 11 Remodelled Sheena Bright's personal residence. This is not a transaction
of the business
Assets Owners´
Liabilities equity
Cash Land Office Accounts Accounts Sheena
supplies receivable payable Bright,
capital
(1) +30 000 (1) +30 000
(2) –20 000 (2) +20 000
(3) +500 (3) +500
(4) +5 500 (4)+5 500
(5) +3 000 (5) +3 000
(6) –3 300 (6) –3 300 *
(7) –300 (7) –300
(8) +1 000 (8) –1 000

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Transaction Details of transactions

Payment of expenses 6 Paid cash expenses: computer lease, $600: office rent $1,100;
employee salary $1,200; electricity and gas $400
Payment of account 7 Paid $300 on the account payable created in transaction 3
Collection on account 8 Collected $1,000 on the account receivable created in transaction 5
Sale of land 9 Sold land for cash at its cost of $9,000
Withdrawal of cash 10 Withdrew $2,000 cash for personal expenses
Personal transaction 11 Remodelled Sheena Bright's personal residence. This is not a transaction
of the business
Assets Owners´
Liabilities equity
Cash Land Office Accounts Accounts Sheena
supplies receivable payable Bright,
capital
(1) +30 000 (1) +30 000
(2) –20 000 (2) +20 000
(3) +500 (3) +500
(4) +5 500 (4)+5 500
(5) +3 000 (5) +3 000
(6) –3 300 (6) –3 300 *
(7) –300 (7) –300
(8) +1 000 (8) –1 000
(9) +9 000 (9) –9 000

Transaction Details of transactions

Payment of expenses 6 Paid cash expenses: computer lease, $600: office rent $1,100;
employee salary $1,200; electricity and gas $400
Payment of account 7 Paid $300 on the account payable created in transaction 3
Collection on account 8 Collected $1,000 on the account receivable created in transaction 5
Sale of land 9 Sold land for cash at its cost of $9,000
Withdrawal of cash 10 Withdrew $2,000 cash for personal expenses
Personal transaction 11 Remodelled Sheena Bright's personal residence. This is not a transaction
of the business
Assets Owners´
Liabilities equity
Cash Land Office Accounts Accounts Sheena
supplies receivable payable Bright,
capital
(1) +30 000 (1) +30 000
(2) –20 000 (2) +20 000
(3) +500 (3) +500
(4) +5 500 (4)+5 500
(5) +3 000 (5) +3 000
(6) –3 300 (6) –3 300 *
(7) –300 (7) –300
(8) +1 000 (8) –1 000
(9) +9 000 (9) –9 000
(10) –2 000 (10) –2 000

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Transaction Details of transactions

Payment of expenses 6 Paid cash expenses: computer lease, $600: office rent $1,100;
employee salary $1,200; electricity and gas $400
Payment of account 7 Paid $300 on the account payable created in transaction 3
Collection on account 8 Collected $1,000 on the account receivable created in transaction 5
Sale of land 9 Sold land for cash at its cost of $9,000
Withdrawal of cash 10 Withdrew $2,000 cash for personal expenses
Personal transaction 11 Remodelled Sheena Bright's personal residence. This is not a transaction
of the business
Assets Owners´
Liabilities equity
Cash Land Office Accounts Accounts Sheena
supplies receivable payable Bright,
capital
(1) +30 000 (1) +30 000
(2) –20 000 (2) +20 000
(3) +500 (3) +500
(4) +5 500 (4)+5 500
(5) +3 000 (5) +3 000
(6) –3 300 (6) –3 300 *
(7) –300 (7) –300
(8) +1 000 (8) –1 000
(9) +9 000 (9) –9 000
(10) –2 000 (10) –2 000

Let us solve now the

Classroom Activity
question 2

Preparing financial statements

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