02 Transaction Analysis - Economics 2.TransactionAnalysis 1...

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17/01/2011 1 1 Engineering Finance and Economics 2. Transaction Analysis 2 2 2 The Account Accounting’s main summary device is the account , the record of changes. Accounts are grouped in three broad categories, according to the accounting equation: 3 The Account 2 3 Assets are economic resources that benefit the business now and in the future Cash Accounts receivable Inventory Notes receivable Prepaid expenses Land Buildings Equipment, furniture, and fixtures
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17/01/2011 2 4 The Account 2 4 Liabilities are the debts of the company. Bank loan Notes payable Accounts payable Accrued liabilities (for expenses incurred but not paid) Long term liabilities (bonds and mortgages) 5 The Account 2 5 Shareholders’ (owners’) equity is the owners’ claims to the assets of a corporation. •Contributed Capital •Retained Earnings •Dividends •Revenues •Expenses 6 Transactions A transaction is any event that has financial impact on the business Transactions Can be measured reliably Provide objective information Must be able to assign $ amount to the event
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17/01/2011 3 7 Double Entry Accounting 2 7 Double entry system of accounting uses debits and credits to record the dual effects of each business transaction.
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