Accounting Process and Transaction Analysis

Abstract

This chapter tries to answer to five questions, as basis for the accounting process. First question relates to the role of the accounting equation in the Financial Statement endeavour, by presenting the equilibrium in between assets, liabilities and equity. Second question deals with double entry principle and why transactions should be represented by at least one debit account, in connection with at least one corresponding crediting account. Third question considers the rules of using accounts and their functioning, with specific examples of assets, liabilities, equity, expenses and revenues’ accounts. Fourth question provides insights to the steps of the transaction analysis and shows what should be performed on a case-by-case transaction. Last part of the chapter considers the links between Financial Statements and the analysis of the trial balance, as an important accounting tool. The chapter closes with a set of summary questions and their answers.