ENG ELC 220 Lecture Notes - Lecture 8: Trial Balance, Accounting Equation, Financial Statement

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Accounting chapter 2: transaction analysis: transactions & accounts. Transaction: any event that has a financial impact on the business and can measured reliably: must occur before firm records anything, provides objective information about financial impact of an economic phenomenon on an entity. 3. 1 the t-account: every business transaction involves both a debit and a credit, total credits and debits for every transaction must be equal. Balance: netting sum of let hand side with the sum of the right hand side. 3. 2 expanision of accounting equation: expansion of accounting equation because shareholder"s equity includes two categories of income statement accounts: income & expenses. Asset: debit = increase (l) credit = decrease (r) Liability: debit = decrease (l) credit = increase (r) Shareholders equity: debit = decrease (l) credit = increase (r) retained earnings & income. Shareholders equity: debit = increase (l) credit = decrease (r) dividends & expenses.

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