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Accounting for a Service Business Unit 1.3

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. Transaction. Something of value is given.

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Accounting for a Service Business Unit 1.3

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  1. Accounting for a Service Business Unit 1.3 Transactions

  2. 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 Transaction Something of value is given Something of value is received

  3. 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

  4. 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 valid • How 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?

  5. Transaction Analysis Template • Found on the Share Drive • Print 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

  6. 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

  7. 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

  8. 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

  9. Goldman Gym – Transaction Analysis • Complete the remaining transactions (page 18) yourself • As a hint…Total Assets = $242,480 at the end of the exercise

  10. 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

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