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BAF3M Accounting

BAF3M Accounting. Chapter 3 –Analyzing Changes in Financial Position. 3.1 Business Transactions. Many events occur every day that change a business’s financial position Businesses buy assets, assume more liabilities and also collect revenues and pay expenses All of these things are called

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BAF3M Accounting

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  1. BAF3M Accounting Chapter 3 –Analyzing Changes in Financial Position

  2. 3.1 Business Transactions • Many events occur every day that change a business’s financial position • Businesses buy assets, assume more liabilities and also collect revenues and pay expenses • All of these things are called “Business Transactions”

  3. 3.1 Business Transactions • Source Documents • Name given to documents that verify the amount of a business transaction (ie receipt, invoice) • Accounting entries are made based on source documents • Source documents are filed for future reference • Accounting Standards – Objectivity Principle • 3.1 Ex’s #1, 2

  4. 3.2 Equation Analysis Sheet • Next step is to see how various business transactions affect and change financial position • Example on overhead pg 61-67, see the effect that 7 transactions have on the balance sheet for METROPOLITAN MOVERS

  5. 3.3 Summary of Steps in Analyzing a Transaction • Step by Step 1 – Identify all items (A and L) that must be changed and make all necessary changes 2 – see if OE has changed 3 – Make certain that at least 2 of the individual items have changed 4 – Make sure the equation is still in balance

  6. 3.3 Exercises Pg 69 #1, 2

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