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Analyzing How Transactions Affect Accounts

Learn how to analyze transactions in order to determine which accounts are affected and how they are changed. Understand the classification and entry of amounts in each account.

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Analyzing How Transactions Affect Accounts

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  1. LESSON 2-2 Analyzing How Transactions Affect Accounts Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School

  2. Analyzing How Transactions Affect Accounts • Before a transaction is recorded in the records of a business, the information is analyzed to determine which accounts are changed and how. • Each transaction changes the balances of at least 2 accounts • Debits = Credits after each transaction LESSON 2-2

  3. Analyzing How Transactions Affect Accounts • Questions for Analyzing a Transaction into its Debit and Credit Parts • Which accounts are affected? • How is each account classified? • How is each classification changed? • How is each amount entered in the accounts? LESSON 2-2

  4. 2 2 1 1 4 4 3 3 RECEIVED CASH FROM OWNER AS AN INVESTMENT page 32 August 1. Received cash from owner as an investment, $5,000.00. Cash & Owner’s Equity 1. Which accounts are affected? Cash (Asset), Owner’s Equity (Equity) 2. How is each account classified? Cash increased, O/E increased 3. How is each classification changed? Cash (debit), O/E (credit) 4. How is each amount entered in the accounts? LESSON 2-2

  5. 2 1 1 4 4 3 3 PAID CASH FOR SUPPLIES page 33 August 3. Paid cash for supplies, $275.00. 1. Which accounts are affected? 2. How is each account classified? 3. How is each classification changed? 4. How is each amount entered in the accounts? LESSON 2-2

  6. 2 1 1 4 4 3 3 PAID CASH FOR INSURANCE page 34 August 4. Paid cash for insurance, $1,200.00. 1. Which accounts are affected? 2. How is each account classified? 3. How is each classification changed? 4. How is each amount entered in the accounts? LESSON 2-2

  7. 2 2 1 1 4 4 3 3 BOUGHT SUPPLIES ON ACCOUNT page 35 August 7. Bought supplies on account from Supply Depot, $500.00. 1. Which accounts are affected? 2. How is each account classified? 3. How is each classification changed? 4. How is each amount entered in the accounts? LESSON 2-2

  8. 2 2 1 1 4 4 3 3 PAID CASH ON ACCOUNT page 36 August 11. Paid cash on account to Supply Depot, $300.00. 1. Which accounts are affected? 2. How is each account classified? 3. How is each classification changed? 4. How is each amount entered in the accounts? LESSON 2-2

  9. TERM REVIEW page 37 • chart of accounts – a list of accounts used by a business LESSON 2-2

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