1. Business Transactions
BAF3M1 – Mr. Meechem

2. Business Transactions
Many transactions can occur in one business day for a company. These transactions tend to cause changes in the financial position of a company.
For example, if a customer owes a company $3 000 and decides one day to pay this debt, the total Accounts Receivable would be reduced by $3 000 while the Cash of the company would increase by $3 000.

3. Business Transaction???
In order for a business transaction to exist, a dollar figure must be associated with the items involved. If there is no dollar figure, it is not a business transaction.

4. Business Transactions
Consider the two following scenarios and decide whether or not they are considered business transactions:
An is sent out to the company employees announcing a meeting.
The company pays one of its employees $800.

5. Business Transactions
When an asset, liability, or equity item is recorded for accounting purposes, a “source document” is required to verify the dollar amount. This document is the original record of the transaction.
EXAMPLES:
- hydro bills - telephone bills
cheque copies - store receipts
cash register summaries - credit card slips
- bank statements - sales invoice

6. Business Transactions
Source documents are kept on file for reference purposes and are proof of transactions. From a source document comes another GAAP, the objectivity principle. The objectivity principle states: Accounting will be recorded on the basis of objective evidence.

7. Transaction Examples
The company purchases an Automobile ($15 000) for cash Affected Accounts: Bank - decrease by $15 000; Automobiles - increase by $

8. Transaction Examples
The company pays a creditor $650. Affected Accounts: Bank - decrease by $ 650; Accounts Payable - decrease by $650.

9. Transaction Examples
The company performs a $2 000 service for a customer on credit. (“On credit” means the customer did not pay right away. Sometimes this type of transaction is called “on account.”) Affected Accounts: Accounts Receivable - increase by $2 000; Capital - increase by $

10. Transaction Examples
The owner invests $4 000 into the company Affected Accounts: Bank - increase by $4 000; Capital - increase by $4 000.

11. Transaction Examples
The owner withdraws $1 000 of the company's money for personal use Affected Accounts: Bank - decrease by $1 000; Capital - decrease by $1 000.

12. Transaction Examples
The company buys $5 000 of equipment on credit. (The company did not pay right away. Sometimes “on credit” is referred to as “on account.”) Affected Accounts: Accounts Payable - increase by $5 000; Equipment - increase by $5 000.

13. Transaction Examples
A customer pays $500 of his/her debt owed to the company Affected Accounts: Bank - increase by $500; Accounts Receivable - decrease by $500.

14. Transaction Examples
It was discovered that $100 worth of supplies were stolen from the company Affected Accounts: Supplies - decrease by $100; Capital - decrease by $100.

15. Transaction Assignment
Your Turn