Flashcards for:
Understanding Accounting Transactions and Their Effects

Accounting facts are events that change an entity's assets and must be recorded in accounting, unlike accounting acts, which do not immediately affect assets or liabilities.

This is a modifying fact as it impacts equity due to the expense recognized (discount).

Because it increases equity (due to interest income) while also affecting assets and liabilities.

Modifying facts are transactions that change equity. An increasing modifying fact, such as a contribution to share capital, increases equity. A decreasing modifying fact, like the payment of an electricity bill, decreases equity.

To record, measure, and inform about entities' assets. Records must impact accounting accounts related to assets, liabilities, or equity.

Mixed facts combine exchangeable and modifying elements, affecting assets, liabilities, and equity, such as receiving client payment with interest.

Exchangeable facts affect asset and liability elements but not equity. An example is the purchase of stocks in cash.

This is a modifying fact as it impacts equity by increasing it.

It's a decreasing modifying fact as it impacts and decreases equity due to it being an expense.

It's an accounting act that has no impact on assets, liabilities, or equity immediately.

Because it affects asset and liability elements but does not impact equity.

An accounting act is an administrative event that does not immediately affect the entity's assets, liabilities, or equity, such as budget approval.

This is an exchangeable fact impacting asset and liability accounts without affecting equity.

It's an exchangeable fact that does not affect equity but impacts assets and liabilities.

They help determine what transactions are recognized in financial reports, influencing how and when company financials are impacted.