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Accounting_Assignment

The document discusses the importance of accounting in recording financial transactions and analyzing business performance, focusing on the rules of debit and credit, accounting titles, and the concept of value received versus value parted with. It outlines the normal balances for assets, liabilities, owner's equity, income, and expenses, and provides examples of transactions to illustrate these concepts. Understanding these principles is crucial for accurate financial recording and informed decision-making in business.

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cmc.daratok
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3 views

Accounting_Assignment

The document discusses the importance of accounting in recording financial transactions and analyzing business performance, focusing on the rules of debit and credit, accounting titles, and the concept of value received versus value parted with. It outlines the normal balances for assets, liabilities, owner's equity, income, and expenses, and provides examples of transactions to illustrate these concepts. Understanding these principles is crucial for accurate financial recording and informed decision-making in business.

Uploaded by

cmc.daratok
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Analysis of Transactions and Accounting Concepts

Introduction
Accounting plays a crucial role in recording financial transactions and analyzing business
performance. This assignment covers the rules of debit and credit, various accounting titles,
and the concept of value received versus value parted with in transactions.

1. Analysis of Transactions and the Rules of Debit and Credit


In accounting, every transaction affects at least two accounts based on the double-entry
system. Each transaction involves a debit (increase or decrease depending on the account
type) and a corresponding credit.

Rules of Debit and Credit


The following are the normal balances of different accounts:

• Assets → Increase (Debit), Decrease (Credit)

• Liabilities → Increase (Credit), Decrease (Debit)

• Owner’s Equity → Increase (Credit), Decrease (Debit)

• Income → Increase (Credit), Decrease (Debit)

• Expenses → Increase (Debit), Decrease (Credit)

Example Transaction: Purchased equipment for ₱10,000 in cash.

Account Entry

Equipment Debit ₱10,000

Cash Credit ₱10,000

2. Accounting Titles: Assets, Liabilities, and Owner’s Equity


Accounting titles represent different classifications of financial elements in business
transactions. Each has a normal balance and impacts the accounting equation:

Assets = Liabilities + Owner’s Equity

• **Assets**: Resources owned by a business (Normal balance: Debit)

• **Liabilities**: Obligations owed by a business (Normal balance: Credit)

• **Owner’s Equity**: The owner's claim on the business (Normal balance: Credit)
3. Accounting Titles of Income and Expenses
Income and expenses represent the financial performance of a business.

• **Income (Revenue)**: Money earned from business activities (Normal balance: Credit)

• **Expenses**: Costs incurred to generate revenue (Normal balance: Debit)

Example of an Income Statement:

Account Debit (₱) Credit (₱)

Sales Revenue 30,000

Rent Expense 5,000

Salary Expense 10,000

Net Income 15,000

4. Value Received vs. Value Parted With


In every financial transaction, there is a value received (what the business gains) and a
value parted with (what the business gives up).

Example Transactions:

Transaction Value Received Value Parted With

Paid ₱2,000 rent Use of space Cash

Sold goods for ₱5,000 on Accounts Receivable Inventory


credit

Borrowed ₱20,000 from Cash Liability (Loan Payable)


bank

Conclusion
Understanding the rules of debit and credit, as well as accounting titles, is essential for
accurate financial recording. By analyzing transactions correctly, businesses can maintain a
balanced accounting equation and make informed financial decisions.

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