Analyzing Changes in Financial Position 3 1

Definitions Business Transaction: a financial event that causes a change in financial position An exchange of things of value Source Documents: provides information needed to process a transaction and proof a transaction occurred Objectivity Principle: a business’s accounting must be recorded on the basis of clear, verifiable evidence e.g. source document Page 59-61 ex. 1-5—1 and 3 together, 2, 4 and 5 individually

Steps in Analyzing a Transaction Identify all asset and liability and owner’s equity items that must be changed and make all necessary changes All transactions will affect at least two individual items Make sure that the equation is still in balance

Figure 3.1: Metropolitan Movers Balance Sheet PowerPoint 3–1 Chapter 3 Figure 3.1: Metropolitan Movers Balance Sheet 4

Transactions for Metropolitan Movers PowerPoint 3–2 (part 1) Chapter 3 Transactions for Metropolitan Movers Transaction 1 Metropolitan Movers pays $1200 cash to reduce the Bank Loan. Transaction 2 K. Lincoln, who owes Metropolitan Movers $2500, pays $1100 in partial payment of the debt. Transaction 3 Equipment costing $1950 is purchased for cash. Transaction 4 A pick-up truck is purchased at a cost of $18 000. Metropolitan Movers pays $10 000 cash and arranges a loan from its bank to cover the balance of the purchase price. 5

Transactions for Metropolitan Movers PowerPoint 3–2 (part 2) Chapter 3 Transactions for Metropolitan Movers Transaction 5 Metropolitan Movers completes a storage service for B. Cava at a price of $1500. A bill is sent to Cava to indicate the additional amount that is owed. Transaction 6 J. Hofner, the owner, withdraws $500 for personal use. Transaction 7 One of the trucks requires an engine adjustment costing $375. The repair is paid for in cash when the truck is picked up. 6

Figure 3.9: Completed Equation Analysis Sheet for Metropolitan Movers PowerPoint 3–3 Chapter 3 Figure 3.9: Completed Equation Analysis Sheet for Metropolitan Movers 7

Assignment Page 59-61—1, 2, 3, 4, 5 Page 69-71—1, 2, 3 Page 71-77—load spreadsheet file and follow steps in textbook, Page 74 Section 3.3 #1, 2 Page 78-83--#1 (tog), 2, 3, 6, 7, Personalize It