Analyzing Business Transactions
LEARNING OBJECTIVES
1. 2. Record in equation form the financial effects of a business transaction. Define, identify, and understand the relationship between asset, liability, and owner’s equity accounts. Analyze the effects of business transactions on a firm’s assets, liabilities, and owner’s equity and record these effects in accounting equation form. Prepare an income statement. Prepare a statement of owner’s equity and a balance sheet. Define the accounting terms new to this chapter. LP2

Chapter

NEW TERMS accounts payable accounts receivable assets balance sheet break even business transaction capital equity expense fair market value fundamental accounting equation income statement liabilities net income net loss on account owner’s equity revenue statement of owner’s equity withdrawals

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4. 5. 6.

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Rollin King and Herb Kelleher had a simple notion when they got into the

airline business: If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline. What began as a small Texas airline has grown to become one of the largest airlines in America. Today, Southwest Airlines flies almost 100 million passengers a year to 63 cities all across the country. In an economy where airlines struggle to stay out of bankruptcy, Southwest has flourished. Other airlines have tried to imitate its business strategy of operating high-frequency point-to-point service routes, but none have been as successful as Southwest, thanks to the company’s unique culture. Consistently voted as one of the top places to work, Southwest has established a culture that encourages employees and customers to have fun. From chili cook-offs to paper airplane contests and dance competitions, you never