aleks wk 2.docx - Transaction problems are solved by...

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Transaction problems are solved by looking at the effect of the transaction on the accounting equation . Assets = Liabilities + Owner's Equity Here is more information on each term of the equation: Assets are anything the business owns or has control over that has probable future economic benefit. Examples of asset accounts are Cash, Accounts Receivable , Supplies, Equipment, Buildings, and Land. Liabilities are money or services owed by the business to an individual or another business. Examples of liabilitiy accounts are Accounts Payable, Notes Payable, and Deferred Revenue . Owner's Equity represents the worth of the business to the owner. o Owner's Equity is increased by additional investments by the owner and by revenue earned from operating the business. Examples of revenue accounts are Sales Revenue and Service Revenue. o Owner's Equity is decreased by withdrawals ( Drawings ) of assets by the owner for personal use and by expenses incurred in operating the business. Examples of expense accounts are Rent Expense, Salary Expense and Advertising Expense. To find out how the transaction affects the accounts, we use the following two principles: Any transaction affects at least two accounts.

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