BUSS1030 · Accounting For Decision Making
Recording Transactions
BUSS1030 records transactions on an expanded-equation worksheet, not in journals with debits and credits. Every transaction is entered as plus/minus changes across columns for assets, liabilities and owner’s equity, and one rule polices it: A = L + OE must hold after every single line. This chapter teaches the recording method (the basic and expanded equations, the dual effect, and why the worksheet is a different model from a journal), how to record everyday transactions on the worksheet, the five end-of-period adjustments (accrued expense and revenue, prepaid expense, unearned revenue, and depreciation as a straight-line, contra-asset allocation), and the theory of closing — which accounts are temporary and which permanent, and why. The Final Exam asks you to keep the equation balanced and to explain the reasoning; it does not ask for debits and credits, journal entries, a trial balance, or to actually perform closing entries.
What this chapter covers
- 011 The basic accounting equation (A = L + OE; equity as residual)
- 022 The expanded equation (Capital + Revenue − Expenses − Drawings)
- 033 Dual effect — why the equation always balances
- 04Recording transactions on the worksheet (no debits/credits)
- 054 The five adjustment types (accruals, deferrals, depreciation)
- 065 Straight-line depreciation as a contra-asset; book value
- 076 Closing entries — theory only (temporary vs permanent accounts)
Worked example: record a transaction on the worksheet
- +1Name the two accounts. The service is earned, so revenue rises; payment is owed, so an accounts receivable (asset) rises.
- +1Classify and sign. Asset +$5,000 (receivable); Owner’s equity +$5,000 (revenue). No cash and no liability move.
- +1Check the equation. Assets +$5,000 = Liabilities (0) + Owner’s equity +$5,000. A = L + OE holds.
- +1Why not cash. The revenue is earned but no cash was received — recording it as cash overstates cash and breaks the equation on that line. Under accrual, the matching asset is a receivable, not cash.
Key terms
- Expanded-equation worksheet
- The BUSS1030 recording tool: plus/minus changes entered across asset, liability and owner’s-equity columns, where A = L + OE must hold after every line. It replaces journals and debits/credits, and it is the records the financial statements are later built from.
- Dual effect
- Every transaction has at least two effects that keep the equation balanced — buy equipment for cash (one asset up, another down); borrow cash (an asset up, a liability up). It is the substitute for double-entry, captured as +/− across columns rather than left/right.
- Adjusting entry
- An end-of-period entry that moves revenues earned and expenses incurred into the correct period regardless of cash timing — the matching principle in action. The five types are accrued expense, accrued revenue, prepaid expense, unearned revenue and depreciation.
- Straight-line depreciation
- The systematic allocation of a depreciable asset’s cost over its useful life: (cost − residual value) ÷ useful life per year. It raises accumulated depreciation (a contra-asset) and is non-cash, so it never appears on the cash flow statement.
- Closing entries
- The theory of transferring the temporary accounts (revenues, expenses, drawings) into owner’s equity at period-end and resetting them to zero, so the next period starts clean. BUSS1030 examines the theory only — you do not perform the entries.
Recording Transactions FAQ
Does BUSS1030 use debits and credits?
No. The unit records transactions on an expanded-equation worksheet as plus/minus changes across asset, liability and owner’s-equity columns — not in journals with debits and credits, and not with a trial balance. You keep A = L + OE balanced after every line and explain the theory of adjustments and closing, but you never write “Dr/Cr.” The worksheet is a different model from a journal, not a simplified one: you track what each event does to the equation, not which account is debited.
Why are end-of-period adjustments needed?
Because cash timing and economic activity rarely line up, and the unit reports on the accrual basis. A service can be earned before cash arrives (accrued revenue), an expense incurred before it is paid (accrued expense), cash paid before the benefit is used (prepaid), or received before it is earned (unearned). Adjustments correct all four (plus depreciation) so profit reflects the period’s real performance — this is the matching principle, and the reason net income ≠ cash flow.
How is depreciation recorded, and does it use cash?
Straight-line depreciation = (cost − residual value) ÷ useful life. Recording it raises an expense (reducing owner’s equity) and raises accumulated depreciation, a contra-asset shown in brackets directly under the asset, reducing total assets. It is a non-cash expense — no cash leaves the business — so it never appears on the cash flow statement. Book value = cost − accumulated depreciation, and is cost-based, not market value.
What does “closing” mean if I never do the entries?
Closing is the idea of sweeping the temporary accounts (revenues, expenses, drawings) into owner’s equity at period-end and resetting them to zero, so next period’s profit isn’t contaminated by this one’s. Permanent accounts (assets, liabilities, equity) carry their balances forward. BUSS1030 asks you to explain that distinction — which accounts close, which carry forward, and why — not to journalise it.
Exam move
Treat recording as one repeated move: for every event, name the two accounts, classify each (A / L / OE, and within OE capital / revenue / expense / drawings), then sign the +/− so A = L + OE still holds. Drill the worksheet on small transaction sets until balancing after every line is automatic, and watch the three places students break it — recording only one side, putting a credit sale under cash, or revaluing an asset above historical cost. Memorise the five adjustment types and what each fixes, and learn depreciation as a non-cash, contra-asset allocation (book value = cost − accumulated depreciation). For closing, learn the temporary-vs-permanent distinction and be ready to explain it — the theory is examined, the entries are not. And never write Dr/Cr.
