ACC 100 Chapter Notes - Chapter 3: Accounting Equation

• School: Ryerson University
• Department: Accounting
• Course: ACC 100
• Professor: Else Grech

Document Summary

An external event involves interaction between the entity and its environment. For example, the payment of wages to an employee is an external event, as is the hiring of a new sales manager, an external event that involves exchange of assets and liabilities between the entity and external parties. Examples of such external events include paying a monthly utility bill, selling merchandise to a customer, or issuing shares to new shareholders. An internal event occurs entirely within the entity. The use of a piece of equipment is an internal event. We will use the term transaction to refer to any event, external or internal, that is recognized in a set of financial statements, an internal event, where the effects on the entity can be reliably measured. Examples of such events include using materials and equipment to manufacture a product, incurring losses due to natural disaster, or accruing interest on a bank loan.