#3.2 : Books of Accounts- Analysis of Business Transactions (Pt. 2)

Question 1

These are economic events that affect the financial position of a business.

Answer 1

Business transactions

Question 2

It is the process of studying a transaction to determine its economic effect ( in terms of money) on the entity’s accounting equation.

Answer 2

Analysis of Business transactions

Question 3

What are business papers?

Answer 3

Transactions are normally identified from “source documents”. Source documents are written evidence containing information about transactions.

Question 4

Business documents come in various forms which include, but are not limited to, the following:

Answer 4

1. Invoices,
2. Official Receipts,
3. Cash or Check Voucher,
4. Check,
5. Promissory note,
6. Statement of account, and the like

Question 5

Simplest tool to analyze the effects of business transactions.

Answer 5

THE T-ACCOUNT

Question 6

Two sides of the T-ACCOUNT:

Answer 6

• One side for recording increases

* Other side for recording decreases

Question 7

What is a normal balance of an account?

Answer 7

Is on the side where an increase in that account is recorded.

Question 8

expanded basic accounting equation:

Answer 8

ASSETS = LIABILITIES + EQUITY + REVENUE – EXPENSES – WTHDRAWAL

Question 9

Normal Balance of Assets

Answer 9

debit

Question 10

Normal Balance of Liabilities

Answer 10

credit

Question 11

Normal Balance of Equity

Answer 11

credit

Question 12

Normal Balance of Withdrawal

Answer 12

debit

Question 13

Normal Balance of Revenue

Answer 13

credit

Question 14

Normal Balance of Expenses

Answer 14

debit

Question 15

You DEBIT to show:

Answer 15

1. Increase in assets 2. Decrease in liabilities 3. Decrease in owner’s equity • Expenses • Withdrawal