The Transaction analysis sheet., Study notes of Accounting

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The

Transaction

Analysis

Sheet

The goal of this section is to learn how various

transactions can affect and change the financial

position of a company.

One of the ways that transactions can be

examined is by using a “Transaction Analysis

Sheet”.

It is vital that you remember the fundamental

accounting equation:

A = L + OE (Assets = Liabilities + Owner’s Equity)

when completing the Transaction Analysis Sheet.

• As transactions occur, the balances of some or all of the accounts in the Balance Sheet can be affected.
• A transaction analysis sheet should be used when studying and recording changes in a business’s financial position. This sheet is built in the same way as the fundamental accounting equation. A = L + OE

Here are some transactions that affect the financial position of ABC Bike Cabs:

Transaction 1: ABC Bike Cabs pays $100 cash to Joe’s Bike Repair (creditor).

• The amounts for Cash and Accounts Payable are updated:
  • Cash is decreased by $100.
  • Debt owed to Joe’s Bike Repair is decreased by $100.
• The amounts for the other items remain unchanged.

After the changes are recorded and the new totals determined, the equation is still in balance. This is very important!

Transaction 2:

The Belair Hotel, who owes ABC Bike Cabs $50.00, pays $25.00 in partial payment of its debt.

• Cash is increased by the amount received: $25.00.
• Accounts Receivable - Belair Hotel is decreased by $25.00 but $25.00 is still owing on the debt.

After the changes are recorded, the equation is still in balance.

After Transaction 2, the Transaction Analysis Sheet will look as follows:

After Transaction 3, the Transaction Analysis Sheet will look as follows:

Transaction 4:

A new bike cab is purchased at a cost of $1000.00. ABC Bike Cabs pays $200.00 cash and arranges a loan from Bank of Mom to cover the balance of the purchase price.

• Cash is decreased by the amount paid: $200.00.
• Bike Cabs is increased by the cost of the new cab: $1,000.00.
• The liability to Bank of Mom is increased by the additional amount borrowed, $800.00.

After the changes are recorded, the equation is still in balance.

Transaction 5: ABC Cabs has an extremely busy day when a cruise ship stops at the town dock. The two cabs earned $2500.00 in fees for the day. Most clients paid cash for cab rides to the downtown shopping district. Some customers, however, bought a package deal from Big Bear Marina for a meal and bike cab tour. Big Bear Marina will pay those fees (totaling $900.00) within 30 days.

• Cash is increased by $1600.
• Big Bear Marina owes $900 more to ABC Bike Cabs and therefore the accounts receivable figure for Big Bear Marina is increased by $900.00.
• No other asset or liability is affected.
• Jon King’s capital is increased by $2500.00.

After the changes are recorded, the equation is still in balance.

After Transaction 5, the Transaction Analysis Sheet will look as follows:

After Transaction 6, the Transaction Analysis Sheet will look as follows:

A New Balance Sheet

Once all of the transactions have been completed, the Balance Sheet can then be updated using the balances at the end of the Transaction Analysis Sheet.