How Effects the Accounting Transaction

It will be beneficial in the long term to be able to understand a classification approach that emphasizes the effect of accounting events rather than the recording procedures involved. This approach is quite pioneering. although business entity engage in numerous transaction, all transaction can be classified in to one of four types, namely:

1. Source of Asset (SA) An asset account increase and a corresponding claims (liabilities or owners equity)  account increase . Example: 1. Purchase of supplies on account. 2. Sold goods on cash on delivery basis.

2. Exchange of Asset (EA) One asset account increase and others asset account decrease. Example: Acquired for cash.

3. Use of Assets (AU) An asset accounts decrease and a corresponding claims (liabilities or equity) accounts  decrease . Example: 1. Settled accounts payable; 2. Paid salaries of employees.

4. Exchange of Claims (EC) One claims  (liabilities or owners equity) accounts increase and another claims (liabilities or owners equity) account decrease. Example: Received utilities bill but did not pay.

Every accountable events has a dual but self balance effect on the accounting equation. recognizing these events will not in any manner affect the quality  of basic accounting model.