Explanation Transaction analysis: Transaction analysis is an economic event that causes impact on the value of the assets, liabilities or stockholder’s equity (increase or decrease) in an accounting equation. Transaction Key letters 1. Purchased supplies on account a, d 2. Paid interest on note payable. k, b 3 . Cash dividend was paid to stockholders. g, b 4. Returned some defective supplies and received a reduction in the amount owed. d, a 5. Made payment to settle note payable. c, b 6 . Received an invoice for utilities used. k, d 7. Received payment in advance from client for work to be done next month. a, d 8. The stockholders’ contributed additional capital to the business. a, f Table (1) 1. Purchased supplies on account: Purchase of supplies on account increases the asset account (supplies) and liabilities account (accounts payable). Therefore increase in asset accounts should be debited and increase in liabilities should be credited. 2. Paid interest on note payable: Interest paid on notes payable decreases the stockholders’ equity account (expenses) and decreases the cash balance of asset account. Therefore, decrease in the stockholders’ equity should be debited, and decrease in asset account should be credited. 3. Cash dividend was paid to stockholders: Payment of cash dividend decreases the stockholders’ equity account ( retained earnings ) and decreases the cash balance of asset account...

1st Edition

ISBN: 9781618531612

Author: Wallace, Nelson, Christensen, Ferris

Publisher: Cambridge

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Financial Transaction Analysis

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business…

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Chapter 2, Problem 5AE

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Match each of the following transactions with the appropriate key letters.

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Chapter 2, Problem 4AE

Chapter 2, Problem 6AE

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FINANCIAL ACCT.F/UNDERGRADS-W/ACCESS

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