ECON 1 Lecture Notes - Lecture 27: Financial Statement, Retained Earnings, The Ledger
Document Summary
Transaction is any event that has a financial impact on the business and can be measured reliably". Every transaction has two sides: you give something you receive something. An account is the record of all the changes in a particular asset, liability, or shareholders" equity during a period". Assets are economic resources that provide a future benefit for a business: cash, accounts receivable, notes receivable, prepaid expenses. Liabilities are obligations to pay an individual or organization: accounts payable, notes payable, accrued liabilities. Shareholders" equity is the owner"s claim to the assets of a corporation: share capital, retained earnings, dividends, revenues, expenses. Accounting is based on a double-entry system which records the dual effects on the entity. Vertical line divides account into two sides left, right . Account title appears on top of the t. Left side is called debit and right side is called credit. The total debits and credits must be equal for every business transaction.
