Analysis of transactions A transaction can be defined as any economic activity pertinent to a business organization. It refers to any business event that affects the assets, liabilities, and stockholders’ equity and can be measured in terms of money. These transactions lead to changes in three elements of the basic equation: A transaction that increases the total assets also increases the total liabilities or owner’s equity. A transaction that decreases the total assets also decreases the total liabilities or owner’s equity. Some transactions might increase one account and decrease another on the same side of the equations, which means one asset increases while another decreases. All transactions affect the accounting equation that is displayed below. The accounting equation should always remain in balance at the time of recording a business transaction: Asset = Liabilities + Stockholders' equity To prepare: The statement showing analysis of transactions.

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Chapter 1, Problem 1.1BP

(a)

To determine

Analysis of transactions

A transaction can be defined as any economic activity pertinent to a business organization. It refers to any business event that affects the assets, liabilities, and stockholders’ equity and can be measured in terms of money. These transactions lead to changes in three elements of the basic equation:

A transaction that increases the total assets also increases the total liabilities or owner’s equity.

A transaction that decreases the total assets also decreases the total liabilities or owner’s equity.

Some transactions might increase one account and decrease another on the same side of the equations, which means one asset increases while another decreases.

All transactions affect the accounting equation that is displayed below. The accounting equation should always remain in balance at the time of recording a business transaction:

Asset = Liabilities + Stockholders' equity

To prepare: The statement showing analysis of transactions.

(b)

To determine

Income Statement:

This is a financial statement that shows the net income earned or net loss suffered by a company through reporting all the revenues earned and expenses incurred by the company over a specific period of time. Income statement is also known as operations statement, earnings statement, revenue statement, or profit and loss statement. The net income is the excess of revenue over expenses.

The net income or net loss of T Agency for the month of April.

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