Chapter 2 Business Transaction Analysis

Chapter 2 Business Transaction Analysis - Chapter 2...

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Chapter 2 Business Transaction Analysis 2.1 Basic Transactions 2.2 Basic Profitability Ratios Business Transactions: one event (internal/external) that effects the value of a firms accounts. Every transaction affects at least 2 accounts (double entry accounting) Eg. Retail Inc. started operations on Jan 1, 2007. Record the impact of the following transactions on account and prepare financial statements for the month of Jan. Transactions Assets Liabilities + Equity Issued shares for $12500 Cash 12500 Common Stock +12500 Purchased equipment $4500 Cash -4500 Equipment 4500 Purchased inventory$2500 on credit Inventory 2500 Sold some inventory $2400 on credit revealed $7000 still in stock Accts receivable 2400 Ret earnings $2400 Account for COGS(inv beg+purchases-inv end) $1800 Inventory -1800 Ret earnings -$1800 Recovered $2200 from customer s account payments Cash 2200 Accts receivable -2200 Paid $600 on account Cash -600 Accts payable -$600 On Jan 1, Purchased insurance policy that covers the period
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Chapter 2 Business Transaction Analysis - Chapter 2...

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