Effects of Transactions on the Accounting Equation

30 三月

4.1 Economic Activities – Business events – Money measurable – Accounting Transactions

4.2 Source Documents

4.2.1 Purchases Order/Sales Order

4.2.2 Cash Receipt

4.2.3 Petty Cash voucher

4.2.4 Sales invoice

4.2.5 Debit note/Credit note

4.2.6 Employment contract

4.2.7 Medical certificate

4.3 Accounting elements (A + E = C + L + I)

4.3.1 Assets = the economic resources owned and controlled by an entity

4.3.2 Liabilities = Economic debts or obligations payable to people or organisations outside the entity

4.3.3 Capital = Owner’s equity. Economic resources invested in the entity by owners. In a corporation, it is called shareholders’ equity, including shares issued and accumulated profits and reserves.

4.3.4 Income = the Economic benefit generated in an entity’s operation

4.3.5 Expenses = the economic resources utilised during operations Capital expenditure = if there are future benefits to be generated by an expenditure for some year to come, the money spent is capital expenditure Revenue expenditure = if all the benefits are fully generated by an expenditure within the reporting year, the money spent is revenue expenditure.

4.3.6 Profit and Loss = the difference between incomes and expenses.

4.4 Accoutning Equation

A = C + L

A = C + Profit  + L

A = C + Income – Expenses + L

A + E = C + L + I

4.5 Rules of Debit and Credit

4.6. Effects of Transactions upon Accounting Equation

More Exercises

4.7 Application of Double Entry in Record Keeping








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