1 Analyzing Changes in Financial Position Chapter

Transcript:1 Analyzing Changes in Financial Position Chapter:
1 Analyzing Changes in Financial Position Chapter 3: Michael Tam, University Student 2 3 Business Transactions Business Transactions 4 Events occur daily that cause the financial position of a business change. Each of these events is called a business transaction. When an asset, liability, or equity item is recorded for accounting purposes, a business paper or source document is required to verify the dollar amount. Source Documents 5 What would be some examples of source documents? Hydro bill Telephone bill Cheque copies Store receipts Cash register summary Credit card slips Source Documents 6 They provide proof for the transaction …… proof of payment, proof of purchase, and reference. They are kept on file for future reference in order to answer questions from owners, managers, auditors, government agencies, etc. GAAP – The Objectivity Principle 7 What does that mean? Different people looking at the same evidence will arrive at the same values for the transaction. Transactions are recorded on fact, not personal opinion. Exercise #1 (Page 59) 8 Given that a transaction is a financial event that requires changing the statement of financial position, decide whether or not each of the following is a transaction for Best Consultants of Kenora, Ontario. The business pays $800 to Mercury Finance to reduce the amount owed to them. The owner, P. Dufour, withdraws $900 from the business for her personal use. A new employee is needed in the payroll department. P. Dufour interviews Stan Martin for the job. Exercise #1 (continued) 9 A $700 consulting service is provided for Rita Bertoli on credit. The business pays the rent for the month, $3,500. The employee in question C above is hired to start work next Monday at $800 per week. The business purchases a new computer for cash at the price of $3,000. The computer in question G above is defective and is replaced at no cost to the business. Exercise #3 (Page 60) 10 Examine this source document and answer the following: Who issued the bill? Who received the bill? When was the bill issued? For what service was the bill issued? Does the bill represent good objective evidence? Why? Assignment for Section 3.1 11 Section 3.1 Review Questions 1, 4, 7 Section 3.1 Exercises 2, 4 Equation Analysis Sheet 12 Analyzing Changes in Financial Position Equation Analysis 13 As business transactions occur, there are changes in the values of assets, liabilities, and capital.