Chapter 3 and 4.docx

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Financial Accounting
Mark Fitzpatrick

Chapter 3: Transaction-an exchange of goods that have value (i.e. Buy a truck for $2500) Source Document-a business paper that is the original record of a transaction (i.e. hydro bills, telephone bills, cheques, receipts) The Objectivity Principle-accounting will be recorded on the basis of objective evidence Equation Analysis Sheet: -uses the accounts from a balance sheet (assets, liabilities, owner’s equity) -used to study and record changes in financial position Steps in Analyzing a Transaction: 1. Identify all items that must be changed and make changes to them. 2. Check if owner’s equity has changed. 3. Make sure there is at least two items that have changed. 4. Make sure the equation (A=L+OE) is still balanced Forensic Accountant Larry Lancefield: -handles accounting issues raised during legal cases -need a CA to become one Chapter 4: Account-a page that is made to record the changes of an individual transaction Ledger-a group of accounts -a simple ledger is a group of T-accounts -assets go on the right side, liabilities and owner’s equity
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