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  • Chapter 2 (4) Effect of Business Transaction

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    Mariyam binti Abdul Aziz KPMAM
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    The document discusses how business transactions affect the accounting equation. It provides examples of common transactions such as purchasing inventory, selling inventory for cash or credit, and depositing cash into the bank. Each transaction is shown as having an effect of increasing or decreasing specific asset, liability, and owner's equity accounts in order to maintain the fundamental accounting equation that total assets must equal total liabilities plus owner's equity.

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    The document discusses how business transactions affect the accounting equation. It provides examples of common transactions such as purchasing inventory, selling inventory for cash or credit, and depositing cash into the bank. Each transaction is shown as having an effect of increasing or decreasing specific asset, liability, and owner's equity accounts in order to maintain the fundamental accounting equation that total assets must equal total liabilities plus owner's equity.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    2 views10 pages

    Chapter 2 (4) Effect of Business Transaction

    Uploaded by

    Mariyam binti Abdul Aziz KPMAM
    The document discusses how business transactions affect the accounting equation. It provides examples of common transactions such as purchasing inventory, selling inventory for cash or credit, and depositing cash into the bank. Each transaction is shown as having an effect of increasing or decreasing specific asset, liability, and owner's equity accounts in order to maintain the fundamental accounting equation that total assets must equal total liabilities plus owner's equity.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 10

    Effect of business transactions to

    Accounting Equation
    Simple accounting equation
    Expanded accounting equation

    Assets = Liabilities + Owner Equities

    Capital + Revenues –
    Assets = Liabilities + Expenses - Drawings
    Effect of business transactions to
    accounting equation
    As business transactions happened, the effect
    (increase or decrease) of the transactions on
    accounting equation are evaluated.
    Example 1:
    Bought a furniture by cash RM200

    Assets = Liabilities Capital

    + 200
    Furniture = 0 0

    -200
    Cash
    Example 2:
    Bought a computer by credit RM2000

    Assets = Liabilities Capital

    + 2000 + 2000
    Office = Account Payable 0
    Equipment
    Example 3:
    Purchase inventory by credit RM1000

    Assets = Liabilities OE
    (capital + income –
    expenses – drawings)

    0 = +1000 -1000
    Account Purchases (expenses)
    Payable
    Example 4:
    Sold inventory by cheque RM1000

    Assets = Liabilities OE
    (C+I-E-D)

    +1000 = 0 +1,000
    Bank Sales (Income)
    Example 5:
    Sold inventory by credit RM1000

    customer

    Assets = Liabilities OE
    (C+I-E-D)

    +1000 = 0 +1,000
    Account Sales (income)
    Receivable
    Example 6:
    Bank in cash RM5000

    Assets = Liabilities Capital

    -5000
    Cash = 0 0

    +5000
    Bank

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