In Accounting Analysis Of Business Transaction

                          Analysis Of Business Transaction

we know that how different business transactions make chnage in the accounting equation (financial position) of the concern. In accounting equation only three basics elements of accounting (the assets, liabilities and capital) have been considred. But, practically there are five basic elements of accounting, the assets, liabilities, capital, expenses and revenues. The students are required to remember an important principle while making the analysis of business transaction.

          "Every business transaction brings about

                  at least a double change in the 

             financial position of a business concern." 

Now let us see how the analysis of the various business transaction is made: 

Transaction no.1 

Mr. Rizwan invests Rs. 100,000 to comence this business.

Analysis:

Two changes have taken place because of this transaction:

1. Cash is increased in the business by Rs. 100,000(an asset).
2. capital or owner equity is increased  by Rs. 100,000 (an internal liability of the business).

Transaction no.2

He open current account with ABL and deposits Rs. 30,000

Analysis:

This transaction has bought two changes:

1. Decrease in cash balance by Rs.30,000 (an asset).
2. Increase in bank balance by Rs.30,000 (an asset).