[ACC 311] - Midterm Exam Guide - Ultimate 28 pages long Study Guide!

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7 Feb 2017
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UT-Austin
ACC 311
MIDTERM EXAM
STUDY GUIDE
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How do transactions affect accounts?
Principles of Transaction Analysis
Transaction Analysis: the process of studying a transaction to determine its economic effect on the
entity in terms of the accounting equation
Two principles underlying the transactional analysis:
1. Every transaction affects at least 2 accounts; correctly identifying those accounts and the direction
of the effect (whether an increase or a decrease) is critical
2. The accounting equation must remain in balance after each transaction
Dual Effects
Dual Effects: the idea that every transaction has at least two effects on the basic accounting equation
Most transactions with external parties involve an exchange by which the business entity both
receives something and gives up something in return
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Balancing the Accounting Equation
Analyzing Chipotle's Transactions
Scenario: Chipotle issues (sold) 10,000 additional shares of common stock with a par value of $.01 per
share at a market value of $.37 per share, receiving $3,700 in cash from investors
Each share of common stock usually has a nominal (low) par value printed on the face of the
certificate
o Par Value: the nominal value per share of capital stock as specified in the corporate charter
Common Stock: the basic voting stock issued by a corporation
Additional Paid-in Capital: the amount of contributed capital less the par value of stock
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