How financial statements are made

- The financial statements are the cap stone … of a careful bookkeeping process. … - The key to properly recording a transaction … is remembering that the accounting equation, … assets equal liabilities plus equity, … must always be maintained. … - To illustrate the process of transaction analysis, … we use a hypothetical transactions for Hannah Market. … A small retail business. … - [Man With Glasses] During the year, … Hannah entered into the following transactions. … - [Man Without Glasses] One, … invested $700,000 of her own cash in the business. … - [Man With Glasses] Two, … borrowed $300,000 cash from the bank. … - [Man Without Glasses] Three, … purchased land, a building, and equipment, … for a total of $2 million. … Hannah paid $100,000 down in cash. … And the remaining $1.9 million … is financed with a mortgage. … - [Man With Glasses] Four, … purchased inventory items for resale, … for a total of $1,300,000. … The entire amount was put on suppliers accounts. … So no cash was paid at the time of purchase. …