Accounting Business Transactions

ACCG106: Chapter 4: Business Transactions

Matthew Steck 44902298

* 4.5

* Distinguish between personal transactions and business transactions. Illustrate with fie examples of each

* A Business Transaction is an occurrence that affect the assets, liabilities and equity items in a business and must be recorded. It is recorded in the accounting information system once an exchange of resources between one business and another person/business has taken place, and the exchange must be reliably measured in monetary terms. Examples include:

1. Payment of wages

2. Sale of goods to customers

3. Payment of advertising

4. Payment of GST

5. Cash purchases of office supplies

* A Personal Transaction is a transaction made by the owners, partners or shareholders that are unrelated to the operation of the business. They aren’t considered business transactions as they do not involve an exchange of goods between the business and another entity. Examples include:

1. Buying an iPad for home use

2. Renting a car while on holiday

3. Purchasing of tickets to events

4. Payment of health insurance

5. Real estate purchases irrelevant to the business

* 4.7

* What is the purpose of an income statement for an entity? List typical items that you would see in the income statement for a florist

* The income statement reports on the income and expenses of a business for a certain period of time, reflecting the profit or loss and therefore the financial performance of the entity.

* Expenses; delivery van, labour expense, advertising expense, depreciation expense.

* Income; operating income, sales revenue

* 4.13

* Illustrate three scenarios of incorrect recordings that may cause a trial balance to not balance

* The trial balance is a list of ledger account balances prepared at the end of a period

1. Any errors made to both accounts will not be detected by the trial balance, for example if equipment...