Busines Transaction

Objectives: Understanding to the business

transaction Understanding to the accounting

equation Analyzing to the effect of business

transaction to the accounting equation

Business Transaction and Accounting Equation22

A. The Definition of Business Transaction

A business transaction is an economic event that has some effect on the resources of a firm or on the sources of a firm’s assets

These business transactions will effect to the financial condition of the company and they must be recorded by a company

Classification of the business

transaction A business transaction can be classified into 2 (two) groups:a. External transactionb. Internal transaction

External transaction is concerned with an external party of the company

Internal transaction is an economic event that occurred in this company

For example External transaction: purchase raw

materials, payment of salaries expenses, payment building rent expenses, etc

Internal transaction: using of supplies, allocating cost of using fixed assets, to recognize an expense not previously recorded (like salaries payable), etc

All of these transactions will effect to three components of accounting equation, that are assets, liabilities, and equities A transaction business will give an effect

to at least two components of the accounting equation

For example: An increase of assets will effect to:

Decrease of other asset, or Increase of the liability, or Increase of the equity

B. Accounting Equation

Accounting equation describes the relationship among assets, liabilities, and owners’ equity or capital

It is the relationship on which all accounting is based

It can be shown as an equation

Assets = Liabilities + Owners’ Equity (Capital)

Assets is the resources of a firm They are acquired by a firm to

aid in accomplishing its goals They give an economic

benefits in the future time

Liabilities are Called Creditors’

Equities Liabilities are an interest of

the creditors in the assets Liabilities comes from

purchasing assets, borrowing money, etc

Owners’ Equities are Called Capital

Owners’ equities are an interest of the owners in the assets of a firm

Owners’ equities = Assets – Liabilities We can conclude that total assets of a

firm will be creditors’ claim and owners’ claim

Owners’ claim is the rest of creditors’ claim

C. Transaction Analysis

Transaction 1 Acquiring assets from the ownerMr. Airlangga invests his money to the firm Rp. 300.000.000,-(in Rp. 000,-)

AssetsAssets == LiabilitiesLiabilities ++ Owner’s Owner’s EquityEquity

CashCash == ++ Airlangga’s Airlangga’s CapitalCapital

300.000300.000 -0--0- ++ 300.000300.000

Transaction 2 Acquiring assets from creditors

Mr. Airlangga applies for a loan at Bank BCA because he doesn’t think that Rp. 300.000.000 will be enough to carry on his business

(in Rp. 000,-)

AssetsAssetsCashCash ==

LiabilitiesLiabilitiesNotes Notes

PayablePayable++

Owners’ Owners’ EquityEquity

Airlangga’s Airlangga’s CapitalCapital

300.000300.000 == -0--0- ++ 300.000300.000

150.000150.000 == 150.000150.000 ++ -0--0-