Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

TIPS ON CHAPTER TOPICS

TIP: Accounting is the language of business. Thus, the more you learn and understand about accounting and its usefulness, the better you will be able to succeed in any business endeavor, regardless of what your major field of study and job title is.

TIP: Transactions are the economic events of an entity recorded by accountants. Some events (happenings of consequence to an entity) are not measurable in terms of money and thus do not get recorded in the accounting records. Hiring employees, placing an order for supplies, greeting a customer and quoting prices for products are examples of activities that do not by themselves constitute transactions. When an event is identified as a transaction, it must be measured (i.e., the appropriate dollar amount must be determined) before it can be recorded.

TIP: There are three types of business organizations: proprietorships, partnerships, and corporations. Ignoring the specific type of organization of a particular entity, we can express its basic accounting equation as follows:

ASSETS = LIABILITIES + OWNERS' EQUITY

If the entity is a corporation, the owners' equity is called stockholders' equity; if the entity is a partnership, the owners' equity is called partners' equity; if the entity is a proprietorship, the residual equity is called owner's equity. The emphasis in this textbook is on the corporate form of organization.

TIP: When you encounter a transaction, always analyze it in terms of its effects on the elements ...