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BENEFITS OF DOCUMENT
Accounting Analyzing Transaction
Lecture Outline :
1. The effects of transactions on financial statements.
2. Describe the characteristics of an account.
3. The rules of debit and credit and the normal balances of accounts.
4. Analyze the financial statement effects of transactions.
5. Prepare a trial balance and how it can be used to discover errors.
6. Discover errors in recording transactions and correct them.
7. Horizontal analysis to compare financial statements.
Did you know that millions of times a day, all over the world, transactions occur? Think about it. Any time that a bill is paid, a loan is made, a purchase is made, or a sale is made, a transaction has occurred. A transaction is any event that involves goods, services, or money changing hands. For the average person, a completed transaction simply means that something on their to-do list has been completed. To the accounting professional, a completed transaction is just the beginning of something even bigger.
It's the beginning of the accounting cycle. The accounting cycle is the series of events that begin with a transaction and end with the closing of the books for an accounting period. In this lesson, we're going to talk about the first step in the accounting cycle: transaction analysis. What is transaction analysis, you wonder? Transaction analysis is the act of examining a transaction to decide how it affects the accounting equation.
Now, in order to analyze a transaction, you must know what it is you're looking for. Accountants are equipped with a very special tool that they use when analyzing transactions – that tool is the accounting equation. The accounting equation states that assets = liabilities + owner's equity. An asset is something that a business owns. A liability is something that a business owes. Owner's equity is the amount of money that a business owner personally invests in the business. Every account that a business has falls into one of these three categories.
Another important thing to know before you can analyze a transaction is that accounting professionals use a double-entry accounting system. A double-entry accounting system is one that is based on the premise that for every one transaction at least two accounts will be affected.
So, what does this mean? It means that at least one account will be debited and one account will be credited. A debit is an entry on the left side of an account that signifies an increase in the balance of an asset account and a decrease in the balance of a liability or owner's equity account. A credit is an entry on the right side of an account that decreases the balance of an asset account and increases the balance of a liability or owner's equity account.
The last thing that you really need to know before you can begin transaction analysis goes back to the accounting equation. If you recall, the accounting equation states that assets are equal to the sum of the total of liabilities and owner's equity. The key to this is in the word 'equals'. The same premise applies to transaction analysis as it does to the accounting equation. The bottom line is that everything must balance.
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Source: Best Practices in Management Accounting PowerPoint Slides: Accounting Analyzing Transaction PowerPoint (PPT) Presentation, UJ Consulting
ABOUT THE AUTHOR: UJ CONSULTING
Untung Juanto ST., MM. Founder of UJ Consulting. He is professionally experienced business and management consultant in several local and multinational companies. [read more] He has an experience in managing an effective and efficient company with various approach methods adapted to different industries because He had a career from the lower management level as Supervisor before finally being at the top management level. His Top Management experience started from the position of General Manager, VP Operation, HR Director and Business Development Director
He completed his undergraduate education majoring in Architecture at Diponegoro University, Semarang, Central Java, Indonesia. After that, He continued to Master of Management level majoring in Human Resource Management with cum laude predicate with a GPA of 3.94 at Mercubuana University, Jakarta, Indonesia.
His last work experience as Deputy President Director at Hutahaean Group in charge of 14 business units engaged in various industries including CPO Production, Oil Palm Plantation, Cassava Plantation, Tapioca flour production, 4 and 5 star hotels, waterparks, golf courses and housing with a total of employees more than 3,000 employees.
His biggest achievement was in 2021 when He served as Deputy President Director at Hutahaean Group Indonesia by increasing the company's revenue from IDR 700 billion to IDR 1.1 trillion (y/y) and increasing the profit margin by more than 20%. Doing a turn around on business units that have lost in the last 5 years become profits. In addition, He have also succeeded in creating an efficient and effective management system by redesigning the Business Process Management (BPM), reviewing Standard Operating Procedures (SOP) and Work Instructions and compiling the appropriate Key Performance Indicator Management (KPIM) to increase employee productivity.
He is currently active as a part-time business and management consultant (online) at Enquire Corp. and Flevy Corp. In addition, He also teach part-time at several universities for courses in strategic management, human resource management, project management, entrepreneurship and business.
UJ Consulting has published 171 additional documents on Flevy.
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