Transaction Analysis Course Work Examples

Published: 2021-06-21 23:47:53
essay essay

Category: Finance, Business, Investment

Type of paper: Essay

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Assets are usually owned by the business. Businesses use these assets in order to generate revenue by selling goods and services. Assets are both tangible and intangible. Normally tangible assets include cash in hand, furniture and fixture, plant, machinery etc. while intangible assets include goodwill of business, trademark or patent etc. (O'Keefe, 2010)
According to GAAP, either the owner of the business owned the assets of business or subject to the claims of creditors. Creditors are those persons who have given loans to another person or businesses. Such loans or credits are called liabilities. Such portions of assets that cannot claim by creditors are called as equity. There must be a balance between total assets and total liabilities and equity. This is also represented by accounting equation i.e. assets=liabilities + equity. (Hendricks, 2012)

This accounting equation provides the basis for the most basic accounting report namely balance sheet. The balance sheet shows the financial position of business at specific periods. It reports the total amount of assets business owns the total amount of liabilities and what is equity of owner in the business. One thing should be in mind that this equation must be always balanced. (O'Keefe, 2010)

In the given scenario, the assets of unified path will be decreased. As the unified path is a direct subsidy to MFS, so there will be no repayment. Hence, the assets will be decreased. Unified path has rendered its services for bookkeeping and charged $400 to MFS. As MFS has not paid this amount to unified path that is why $400 is debt for MFS and MFS has to repay this amount eventually. The assets of the unified path will not be decreased it the repayment to unified path is done. Since MFS has borrowed loan from unified path, so there is a possibility that loan will be paid with interest. Hence, unified path will receive profit on this transaction.

References

Hendricks, C. (2012, July 13). Ifrs vs gaap accounting standards. Retrieved from
http://ezinearticles.com/?IFRS-Vs-GAAP-Accounting-Standards&id=7176733
O'Keefe, A. (2010, September 28). Accounting equation and financial statements. Retrieved

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