Business Transactions and Financial Statements
…Each business should have an accounting system best suited to its particular needs. The method used must
provide the most effective means of recording, summarizing and presenting appropriate accounting data for management and for others
who have an interest in the business…
…The dollar amount of cash transactions is entered in the accounting journals of the business. Information about
the nature of transaction and the dollar amount that is involved generally appears first on a business document…
…The basic financial statements are the balance sheet and the operations statement. The balance sheet shows the
firm's condition on the last day of the accounting period. It shows what the business owns and what it owes to its creditors or its
owners: assets = liabilities + owner's equity…
…A statement of owner's equity shows what changes have occurred in regard to equity since the previous balance
sheet was compiled. The operations statement is also referred to as a profit and loss statement. It shows how much profit or loss
was generated by the operations of the company during the accounting period…
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