1. Accounting 11 UNIT 2 Business Transactions September 2011

2. Key ideas from unit 1 and 2 The Business Entity Principle – Each business is considered a separate unit or entity. For the purpose of accounting, the financial data for a business must be kept separate from the owner’s personal data. The Cost Principle – Assets are shown on the balance sheet at the cost of their acquisition or construction.

3. Key ideas from unit 1 The purpose of accounting is to provide financial information for decision making. The liquidity order is the order in which assets that last a short time are listed on the balance sheet. It is the order in which those assets can be converted to cash. The maturity date governs the order in which liabilities are listed on the balance sheet. Liabilities are listed according to the order they are to be repaid, with the soonest repayments listed first.

4. UNIT 2 Business Transactions The balance sheet for Goldman’s Gym was prepared on June 30, 20--. Events will occur in the business after this date and will change the value of balance sheet items.

5. Using a Transaction Analysis Sheet

6. Asset purchased for cash Purchased new training equipment for $500 cash. Training Equipment will increase by $500. Cash will decrease by $500.

7. Asset purchased on credit Bought office supplies for $55, on credit, from Central Supply Co. Office Supplies increases by $55. Accounts Payable increases by $55.

8. Cash received from customers Received $3000 cash from customers (various accounts receivable) who owed money. Cash increases by $3000. Accounts Receivable decreases by $3000.

9. Jul 15 Sold some unused equipment for $400 cash. 18 Paid $375 cash to Central Supply Co. for an account payable that had become due. 21 Owner invested an additional $800 in the business. 25 Purchased equipment from Niagara Sport Ltd. for $3000; $2000 was paid in cash and $1000 will be paid in 30 days. 15 Cash increases $400, Training Equipment decreases $400. 18 Cash decreases $375, Accounts Payable decreases $375. 21 Cash increases $800, R. Millar, Capital increases $800. 25 Cash decreases $2000, Training Equipment increases $3000, Accounts Payable increases by $1000.