Analyzing and Summarizing Business Transactions

A business transaction is an event that has some effects on the resources of a firm or on the source of a firms assets. Operating activities involve the production or purchase of merchandise and the sale of goods or services to customers. Investing activities is a transaction that involve making and collecting loans or that involve purchasing and selling of plant assets, other productive assets, and investments. Financing activities is the companys transactions with its owners and long-term creditors. Assets = Liabilities + Owners Equity 1. Mr. Juan dela Cruz invested P50, 000 cash to start his own repair shop to be known as Cruz Service Center. Assets = Liabilities + Capital Cash Dela Cruz, Capital + 50, 000 +50, 000

2. Purchased supplies (oil, grease, nuts and bolts, etc.) for P2, 500 for cash.

Assets =Liabilities +Capital AccountsDela Cruz, Cash Supplies Payable Capital 50,000 -2,500 +2,500 47,500 2,500 3. Purchased equipment on account for P25,600. Assets =Liabilities +Capital Accounts Dela Cruz, Cash Supplies EquipmentPayable Capital 47,500 2,500 25,600 25,600 47,500 2,500 25,600 25,600

50,000 50,000

50,000 50,000

4. Borrowed money from the bank by giving a 6-month, non interest bearing for P20,000. Assets +Capital Accounts NotesDela Cruz, Cash SuppliesEquipment PayablePayableCapital 47,500 2,500 25,600 25,600 +20,000 +20,000 47,500 2,500 25,600 25,600 20,000 5. Paid P12,800 for the equipment purchased on account. =Liabilities

50,000 50,000

Assets

=Liabilities

Cash Supplies 67,500 2,500 -12,800-12,800 54,700 2,500

+Capital AccountNotes Dela Cruz Equipment Payable Payable Capital 25,600 25,600 20,000 50,000 25,600 12,800 20,000 50,000