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Analyze Transactions Affecting Balance Sheet Items 2. Analyzing Transactions Affecting Income Statement Items

This document discusses analyzing transactions that affect balance sheet and income statement items. It provides examples of 10 transactions affecting assets, liabilities, and owner's equity accounts. These include investments, purchases and returns of assets, withdrawals by the owner, loans, and payments. The document aims to help students learn how to analyze the impact of transactions on the key financial statements. Exercises are provided for students to practice determining the effects of transactions on specific accounts.

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122 views4 pages

Analyze Transactions Affecting Balance Sheet Items 2. Analyzing Transactions Affecting Income Statement Items

This document discusses analyzing transactions that affect balance sheet and income statement items. It provides examples of 10 transactions affecting assets, liabilities, and owner's equity accounts. These include investments, purchases and returns of assets, withdrawals by the owner, loans, and payments. The document aims to help students learn how to analyze the impact of transactions on the key financial statements. Exercises are provided for students to practice determining the effects of transactions on specific accounts.

Uploaded by

Revise Pastralis
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Week 7

Unit 3: Analyzing Transactions


Topics: Analyzing Transactions Affecting Balance Sheet Items
Analyzing Transactions Affecting Balance Sheets and
Income Statements

Learning Outcomes:
1. Analyze transactions affecting balance sheet items
2. Analyzing transactions affecting income statement
items

Concept Digest (Discussion)

Analyzing Transactions Affecting Balance Sheet Items


According to Mejorada, N. (2007), to maintain this equation,
transactions affecting balance sheet items may only have the
following effects:
a. An increase in asset items accompanied by decrease in other
asset items, increase in liabilities, increase in owner’s
equity or a combination of these.
b. A decrease in asset items accompanied by increase in other
asset items, decrease in liabilities, decrease in owner’s
equity or a combination of these.
c. An increase in liability items accompanied by increase in
assets, decrease in other liability items or owner’s equity
or a combination of these.
d. A decrease of liability items accompanied by decrease in
assets, or increase in other liability items or owner’s
equity or a combination of both.
e. An increase in owner’s equity accompanied by increase in
assets, decrease in liabilities or a combination of both.
f. A decrease in owner’s equity accompanied by decrease in
assets, increase in liabilities or a combination of these.
The following are examples of thee transactions:
1. The owner, H. Palacios invests P30,000 cash in his
barbershop.
Analysis:
Increase in asset: Cash P30,000
Increase in owner’s equity:
H. Palacios, Capital 30,000

2. The business buys tables for P3,000 cash


Analysis:
Increase in asset: Furniture and Fixtures P3,000
Decrease in asset: Cash 3,000

3. The proprietor buys chairs for his barbership for P5,500 an


account.
Analysis:
Increase in asset: Furniture and Fixtures P5,500
Increase in liability: Accounts payable 5,500

4. The business buys a lot for P50,000 paying cash of P20,000


with the balance covered by a promissory note.
Analysis:
Increase in asset: Land P50,000
Decrease in asset: Cash 20,000
Increase in liability: Notes payable 30,000

5. The owner withdraws cash of P6,000 from the business.


Analysis:
Decrease in asset: cash P6,000
Decrease in owner’s equity: H. Palacio, Capital 6,000

6. The owner, H. Palacio pays P2,500 accounts payable of the


business from his personal funds.
Analysis:
Decrease in liabilities : Accounts Payable P2,500
Increase in owner’s equity: H. Palacio, Capital 2,500

7. The owner, H. Palacio, buys his family’s lot by paying


P10,000 from cash of the business.
Analysis:
Decrease in owner’s equity: H. Palacio, Drawing P10,000
Decrease in asset: cash 10,000

8. Tables bought for P1,500 cash are returned because they are
defective. The business receives the P1,500 refund.
Analysis:
Increase in asset: cash P1,500
Decrease in asset: Furniture & Fixtures 1,500

9. Chairs bought on account for P2,000 are returned for being


defective. Accordingly, the supplier reduces the obligation
of the business by the same amount.
Analysis:
Decrease in liability: accounts payable P2,000
Decrease in asset : Furniture and Fixtures 2,000

10. The owner, H. Palacio makes additional investment in the


business in the form of air conditioning units for his
barbershop. The fair value of these units at the time
they are transferred to the business is P20,000
Analysis:
Increase in asset: Furniture and Fixtures P20,000
Increase in owner’s equity: H. Palacio, Capital 20,000
Activities (Formative)
Title: Problem Solving Practice
Things to do:
1. Determine the effects of the following on assets,
liabilities, owner’s equity and the specific account
titles to be used.
Questions:
Example:
Mar Viola invests cash of P50,000 in an appliance repair shop.
Analysis:
Effect in asset: cash P50,000
Effect in owner’s equity: Mar Viola, Capital P50,000
1. Tools are bought for P12,000
2. Mr. Viola withdraws P18,000 from the business.
3. A loan of P10,000 is obtained from the Metro Bank.
4. One-fourth of the loan in No. 3 is paid.
5. Mr. Viola makes an additional investment P8,000
Assessment (Summative)
Title: The Deep Thinker
Date of Submission:
Rubric Used: None
Things to do:
1. Tabulate the effects of the following transactions on
assets, liabilities, and owner’s equity.
Questions:
Asset Liabilities Owner’s
Equity
Example: Mr. Karl P80,000 P80,000
Mari invests P80,000
cash in an
advertising firm.
1.Karl buys office
tables and other
pieces of furniture
for P22,000 cash.
2.He transfers to
the business his
family computer
valued at P35,000
3. The monthly
rental on the office
space of P18,000 is
paid.
4.Salaries and wages
of employees
amounting to P28,000
are paid.
5.Karl Mari
withdraws P16,000
cash from his
business

References:
 Mejorada, N (2007). Bookkeeping. Quezon City, Philippines.
KATHA Publishing Co. Inc.
 https://www.thebalancesmb.com/bookkeeping-101-a-beginning-
tutorial-392961

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