Question

Chapter 2 Review of the Accounting Process Main Points 1. Accounting Equation (L01) 2. Transaction analysis (LO2) 3. Journal entries (LO3) 4. Adjusting entries (LO5, 6) 5. Posting (LO4) 6. Trial Balance (L06) 7. Preparing financial statements (L07) 8. Closing entries (L08) 2. Transaction analysis (L02) For each event below, determine whether it is or is not a transaction: 1. Nine West buys a cash register 2. Nine West order 10 pairs of shoes from Eight West; shoes will be shipped in two weeks 3. Nine West received the ordered shoes but does not pay for them 4. Nine West signs a contract with an attorney to provide legal services starting next month; no money changes hands 5. Nine West sells shoes to a customer

Answer 1

The Main difference between transaction and event is when an event brings change to account balances, it is classified as a transaction and recorded in the books.

lets examine each events -:

1.buying a cash register will change the account balance as it as an adminsitrative expense , therefore it is a transaction

2.only ordering shoes will not change any account balance , therefore it is not a transaction.

3.since the order has been received, and in accrual basis of accounting revenue and expenses are recorded when they are incurred, this will be a transaction.

4.only signing a contract doesn't change any account balance , hence it is not a transaction.

5.selling a shoe to customer is transaction as it will change account balances