BAF3M Accounting Chapter 3 –Analyzing Changes in Financial Position

3.1 Business Transactions Many events occur every day that change a business’s financial position Businesses buy assets, assume more liabilities and also collect revenues and pay expenses All of these things are called “Business Transactions”

3.1 Business Transactions Source Documents –Name given to documents that verify the amount of a business transaction (ie receipt, invoice) Accounting entries are made based on source documents Source documents are filed for future reference Accounting Standards – Objectivity Principle 3.1 Ex’s #1, 2

3.2 Equation Analysis Sheet Next step is to see how various business transactions affect and change financial position Demo example on screen (Antonelli’s Accounting Services) Read pg 61-67, to see the effect that 7 transactions have on the balance sheet for METROPOLITAN MOVERS

3.3 Summary of Steps in Analyzing a Transaction Step by Step 1 – Identify all items (A and L) that must be changed and make all necessary changes 2 – see if OE has changed 3 – Make certain that at least 2 of the individual items have changed 4 – Make sure the equation is still in balance

3.3 Exercises Pg 69 #1, 2