Analyzing changes in financial position by Peter

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Analyzing changes in financial position

Published on Nov 28, 2015

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PRESENTATION OUTLINE

Analyzing changes in financial position

Mr. Melkonian

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Remember this guy?

We have some catching up to do...

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Teacher misses school for a week

Quiz on Wednesday...

everyday events occur that cause financial position to change

this is called a business transaction

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If I was to buy $5 000 worth of cabinets, there would be $5 000 increase in the item cabinets. There will also be a loss of $5 000 in cash.

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If I owe the bank $5 000 and make a payment of $1 000, it's also a transaction

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If a restaurant gets inspected randomly by the government and gives suggestions for changes - not a transaction, since no assets/liabilities changed.

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Source document

name of document when an asset, liability, or equity item is recorded

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examples of source documents

Bills
Cheque copies
Store receipts
Credit cart slips

Objectivity principle

accounting will be recorded on basis of objective evidence

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Source document always the best

For impartial evidence

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Summarizing steps of analyzing a transaction

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identify all items that must be changed and make changes

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see if the owner's equity has changed

better off after a transaction? equity increased. opposite applies too

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make certain at least 2 of the individual items have changed

assets, liabilities, equity can all change, but never just one.

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Make sure equation is still in balance

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Untitled Slide

Peter Melkonian