[andrewsunny]

What is the sequence to follow when analysing transactions?

[andrewsunny]

What is the sequence to follow when analysing transactions?

[morgaine300]

It depends on what you mean by "analyzing" the transaction. If you ask me, analyzing a transaction is one step in determining how to record the transaction. That is, interpreting what the transaction means. In which case, there isn't any particular sequence of steps.

However, if by that statement they are meaning the steps to record the transaction, which is a different thing, it would go something like this:
1) Analyze the transaction to determine what it means, and decide which two or more accounts will be used. (This means breaking down the transaction to find the parts that are indicating which accounts are used. Much of this is understanding accrued accounting and much of it is just experience and practice.)
2) Decide for each account what type of account it is. That is, you have five classifications of accounts and you have to know where each account falls: asset, liability, equity, revenue or expense.
3) Decide for each account whether you want to increase the balance or decrease the balance.
4) If you're in a beginning chapter using a "tabular" or "extended equation" type thing to record them, this step doesn't exist. If you're into debits & credits and have to determine that, then this step is to use the above information and your dr/cr rules to figure that out.

PLEASE NOTE:
1) Steps 2 & 3 can be in either order, and have to be done individually for each account used.
2) And more importantly, if that was a homework question you were supposed to answer, which was asked by the book or your instructor, your book may divide these steps up in a different manner, so don't assume this set of steps will work for the answer. However, these steps do actually work in reality, regardless of whether your book may choose to list them out in a different manner.