1. 2 Business Transaction and Accounting Equation Objectives:
CHAPTER
Business Transaction and Accounting Equation 2
Objectives:
Understanding to the business transaction
Understanding to the accounting equation
Analyzing to the effect of business transaction to the accounting equation

2. A. The Definition of Business Transaction
A business transaction is an economic event that has some effect on the resources of a firm or on the sources of a firm’s assets
These business transactions will effect to the financial condition of the company and they must be recorded by a company

3. Classification of the business transaction
A business transaction can be classified into 2 (two) groups:
External transaction
Internal transaction
External transaction is concerned with an external party of the company
Internal transaction is an economic event that occurred in this company

4. For example
External transaction: purchase raw materials, payment of salaries expenses, payment building rent expenses, etc
Internal transaction: using of supplies, allocating cost of using fixed assets, to recognize an expense not previously recorded (like salaries payable), etc

5. All of these transactions will effect to three components of accounting equation, that are assets, liabilities, and equities
A transaction business will give an effect to at least two components of the accounting equation
For example: An increase of assets will effect to:
Decrease of other asset, or
Increase of the liability, or
Increase of the equity

6. Assets = Liabilities + Owners’ Equity (Capital)
B. Accounting Equation
Accounting equation describes the relationship among assets, liabilities, and owners’ equity or capital
It is the relationship on which all accounting is based
It can be shown as an equation
Assets = Liabilities + Owners’ Equity (Capital)

7. Assets is the resources of a firm
They are acquired by a firm to aid in accomplishing its goals
They give an economic benefits in the future time

8. Liabilities are Called Creditors’ Equities
Liabilities are an interest of the creditors in the assets
Liabilities comes from purchasing assets, borrowing money, etc

9. Owners’ Equities are Called Capital
Owners’ equities are an interest of the owners in the assets of a firm
Owners’ equities = Assets – Liabilities
We can conclude that total assets of a firm will be creditors’ claim and owners’ claim
Owners’ claim is the rest of creditors’ claim

10. C. Transaction Analysis Transaction 1
Acquiring assets from the owner
Mr. Airlangga invests his money to the firm
Rp ,-
(in Rp. 000,-)
Assets =
Liabilities +
Owner’s Equity
Cash
Airlangga’s Capital
-0-

11. Transaction 2 Acquiring assets from creditors
Mr. Airlangga applies for a loan at Bank BCA
because he doesn’t think that Rp will be enough to carry on his business
(in Rp. 000,-)
Assets
Cash =
Liabilities
Notes Payable +
Owners’ Equity
Airlangga’s Capital
-0-