Transaction Analysis Flashcard

Front

What is transaction analysis?

Back

Transaction analysis is the process of reviewing and recording the financial effects of business transactions on the accounting equation.

Front

What is the accounting equation?

Back

The accounting equation is Assets = Liabilities + Equity, which represents the relationship between a company's resources and its obligations.

Front

What is a financial transaction?

Back

A financial transaction is any event that has a monetary impact on the financial statements of a business.

Front

What is the first step in analyzing transactions?

Back

Identify what the business is buying or selling.

Front

What is a debit entry?

Back

A debit entry is an accounting entry that increases an asset or expense account or decreases a liability or equity account.

Front

What is a credit entry?

Back

A credit entry is an accounting entry that increases a liability or equity account or decreases an asset or expense account.

Front

What is the double-entry accounting system?

Back

The double-entry accounting system is a method where every transaction affects at least two accounts, ensuring that the accounting equation remains balanced.

Front

How does the double-entry system help in error detection?

Back

By ensuring debits and credits are equal, it helps identify discrepancies in the accounting records.

Front

What is the purpose of journal entries?

Back

Journal entries are used to record all transactions in the accounting system, detailing the accounts affected and the amounts.

Front

What are financial statements?

Back

Financial statements are formal records of the financial activities of a business, including the balance sheet, income statement, and cash flow statement.