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Analysis of Business Transactions
Analysis of Business Transactions
Analysis of Business Transactions
Business Transactions
3. It must have a two-fold effect on the elements of the accounting equation (assets,
liabilities and proprietorship). This two-fold effect of the business transaction on
the accounting elements is the very foundation of the double-entry bookkeeping
system.
In every transaction, there is a value received and a value parted with. For example, when
an equipment is acquired for P50,000, the buyer receives an equipment with a peso value of
P50,000 and parts away with his cash of P50,000. On the other hand, the seller receives cash of
P50,000 and parts away with the equipment with a selling price of P50,000.
The following tabulation illustrates common types of business transactions and the
corresponding values involved:
EXERCISE. Indicate the value received and the value parted with in the following transactions.
8. Collected receivables.