Two Or More Paragraphs, List Of Each Transaction Required

Two Or More Paragraphlist At Least One Ofeachtransaction Related To Al

Two or more paragraph list at least one transaction related to each of the following business events: purchase of goods or services for cash, providing services for cash, providing services on account, purchase of goods or services on account, payment of a previously recorded expense, receipt of a previously recorded revenue earned. Explain your logic in the analysis of your business transactions and list the source documents that serve as evidence for each transaction. For each transaction, identify the affected accounts, specify whether each account is increased or decreased, and whether it is debited or credited. Also, consider how the omission of one of these transactions from the records would impact the trial balance, particularly whether any account balances would be understated or overstated.

Paper For Above instruction

Understanding and analyzing business transactions is fundamental to sound accounting practices. This exercise involves listing specific types of transactions, explaining their logic, identifying affected accounts, and understanding their effects. Additionally, it explores the consequences of omitted transactions on the trial balance, which is essential for maintaining financial accuracy.

Purchase of Goods or Services for Cash

Suppose a company purchases office supplies worth $500 paying immediately by cash. The source document here is a sales receipt or a purchase invoice from the supplier. The Supplies asset account increases with a debit of $500, reflecting an increase in supplies on hand. Conversely, the Cash asset account decreases by a credit of $500, representing the outflow of cash. This transaction affects two asset accounts, with the total debits equaling total credits, maintaining the accounting equation's balance.

Providing Services for Cash

Imagine a consulting firm provides services worth $2,000 and receives payment immediately. The source document could be a sales receipt issued to the client. Here, the Cash asset account increases (debited) by $2,000, indicating more cash on hand. Simultaneously, the Revenue account increases (credited) by the same amount, recognizing the income earned. This increases both asset and equity, reflecting the company's earning activities.

Providing Services on Account

Consider a scenario where a company delivers services valued at $3,000 but does not receive payment immediately. Instead, the customer will pay later, creating an Accounts Receivable. The source document might be an invoice sent to the customer. In this case, the Accounts Receivable asset account is debited by $3,000, indicating an amount owed to the company. The Service Revenue account is credited by $3,000, recognizing the earned revenue. This transaction increases assets and revenue without affecting cash at the time of service delivery.

Purchase of Goods or Services on Account

Suppose the company buys inventory worth $1,200 on credit, with payment due in 30 days. The source document is a purchase invoice from the supplier. The Inventory asset account increases (debited) by $1,200, reflecting an increase in stock. The Accounts Payable liability account increases (credited) by the same amount, indicating the company's obligation to pay in the future. This transaction increases assets and liabilities appropriately.

Payment of a Previously Recorded Expense

If the company pays $800 for a utility bill previously recorded as an expense, the source document could be a utility bill or payment receipt. The Cash asset account decreases (credited) by $800, indicating cash outflow. The Expense account decreases (debited) by $800, or more precisely, the asset or liability initially recorded needs correction; often, the expense is reversed or reduced if initially overstated. This transaction decreases assets and expenses, reducing net income.

Receipt of a Previously Recorded Revenue Earned

Consider an advanced payment of $1,500 received from a customer for services to be provided later. The source document is the receipt issued upon payment. The Cash account increases (debited) by $1,500. The Unearned Revenue liability account increases (credited) by the same amount, representing a future obligation. When services are performed later, the Unearned Revenue is decreased, and Revenue is increased accordingly.

Impact of Omitting a Transaction on the Trial Balance

If any of these transactions is not recorded, the trial balance will be affected in various ways. For example, omitting a sale recorded on account would understate assets (Accounts Receivable) and revenue, causing the total debits to be less than total credits, or vice versa. Specifically, as both affected accounts are assets and revenue or liabilities, their omission impacts the balance of the trial balance. Generally, the total debits and credits should remain equal, so the effect usually appears as an imbalance if a transaction is omitted, resulting in an inaccurate reflection of financial health.

Conclusion

Accurate recording of transactions is crucial for reliable financial statements. By analyzing each transaction, identifying affected accounts, understanding their debit and credit implications, and recognizing the impact of omissions, businesses can ensure their financial reporting remains precise. These principles form the foundation of sound accounting practice, facilitating transparency and accountability within the organization.

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