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What Do You Think? What do you think is meant by the term transaction?

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Presentation on theme: "What Do You Think? What do you think is meant by the term transaction?"— Presentation transcript:

1 Chapter 3, Section 2 Transactions That Affect Owner’s Investment, Cash, and Credit
What Do You Think? What do you think is meant by the term transaction? Glencoe Accounting Unit 2 Chapter 3 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

2 Transactions That Affect Owner’s Investment, Cash, and Credit
SECTION 3.2 Main Idea Accounts are used to analyze business transactions. You Will Learn how businesses use accounts. the steps used to analyze a business transaction. Glencoe Accounting Unit 2 Chapter 3 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

3 Transactions That Affect Owner’s Investment, Cash, and Credit
SECTION 3.2 Key Terms business transaction account accounts receivable accounts payable investment on account Glencoe Accounting Unit 2 Chapter 3 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

4 Transactions That Affect Owner’s Investment, Cash, and Credit
SECTION 3.2 Business Transactions A business transaction is an event that causes a change in assets, liabilities, or owner’s equity. A business records these changes in subdivisions called accounts. The number of accounts will vary from business to business. Two possible business accounts are accounts receivable, an asset account, and accounts payable, a liability account. Glencoe Accounting Unit 2 Chapter 3 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

5 Transactions That Affect Owner’s Investment, Cash, and Credit
SECTION 3.2 Effects of Transactions on the Accounting Equation To analyze a business transaction, follow these steps: Identify the accounts affected. Classify the accounts affected. Determine the amount of increase or decrease for each account affected. Make sure the accounting equation remains in balance. Glencoe Accounting Unit 2 Chapter 3 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

6 Transactions That Affect Owner’s Investment, Cash, and Credit
SECTION 3.2 Investments by the Owner Money or other property paid out in order to produce profit is an investment. Analyze a cash investment transaction: Glencoe Accounting Unit 2 Chapter 3 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

7 Transactions That Affect Owner’s Investment, Cash, and Credit
SECTION 3.2 Glencoe Accounting Unit 2 Chapter 3 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

8 Transactions That Affect Owner’s Investment, Cash, and Credit
SECTION 3.2 Cash Payment Transaction Analyze a cash purchase business transaction: Glencoe Accounting Unit 2 Chapter 3 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

9 Transactions That Affect Owner’s Investment, Cash, and Credit
SECTION 3.2 Credit Transaction Purchasing an item on credit is also called buying on account. Analyze a purchase on account business transaction: Glencoe Accounting Unit 2 Chapter 3 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

10 Transactions That Affect Owner’s Investment, Cash, and Credit
SECTION 3.2 Key Terms Review business transaction An economic event that causes a change – either an increase or a decrease – in assets, liabilities, or owner’s equity. account A subdivision under assets, liabilities, or owner’s equity that summarizes the changes and shows the balance for a specific item. accounts receivable The amount of money owed to a business by its credit customers. Glencoe Accounting Unit 2 Chapter 3 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

11 Transactions That Affect Owner’s Investment, Cash, and Credit
SECTION 3.2 Key Terms Review accounts payable The amount of money owed, or payable, to the creditors of a business. investment Money or other property provided for the purpose of making a profit. on account The purchase of an item on credit. Glencoe Accounting Unit 2 Chapter 3 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.


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