CH 3 - TRANSACTIONS BALANCES Every asset liability and...

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Every asset, liability and equity (including revenues and expenses) has its own pattern of increases and decreases as a result of transactions and adjustments. Accounts Receivable: Beginning Balance + Sales on Account -Cash from Customers = Ending Balance Accounts Payable Beginning Balance + Purchases on Account -Cash Paid to Suppliers= Ending Balance Inventory of Goods for Sale Beginning Balance + Purchases(net of returns) -Cost of Goods Sold= Ending Balance
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For any Asset, Liability, Equity item it important to know what the transactions and adjustments are that are normally responsible for changes in the balance. Note also how cash flows disappear into the balance of items such as A/R and A/P This is all part of the accounting model based on the accounting equation. (see Harris Company) Harris Company presents a simple set of Financial Statements to illustrate how keeping track using the Accounting Equation produces information that articulates from the Beginning Balance Sheet to the Ending
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CH 3 - TRANSACTIONS BALANCES Every asset liability and...

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