Transaction Analysis Graphics

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• Transaction Analysis Graphics
• By Jim Patten

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TAG is designed to

• Illustrate the accounting equation
• Help you visualize the flow of transactions
• Give you a visual concept of the four primary
  financial statements
• Balance Sheet
• Income Statement
• Statement of Cash Flows
• Statement of Changes in Equity

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Here is the BALANCE SHEET along with the balance
sheet equation.
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AL IDRE A graphic view of the accounting equation
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Assets come in four flavors

• Cash
• Investments
• Receivables
• Unexpired Costs

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CASH IS KING!

• Of the four types of assets cash is the most
  critical
• In TAG cash is shown as a clock
• Nothing happens at 12 oclock, so you wind up
  with 11 cash flows.

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CASH FLOW EXAMPLES
11.Cost recovery upon sale of an
investment Dividends received (Equity
Method) 10. Purchase of an investment
9. Cost recovery upon
sale of an unexpired cost asset 8.
Cash payment for an unexpired cost
asset 7. Cash revenues and gains
6. Payments of
expenses and inventory
purchases
under the periodic method
1. Sale of stock Sale of treasury stock
Owner investment 2. Stock redemption Owner
draws 3. Borrowing proceeds Revenue
collected in advance Agency
collections 4. Payment of liabilities 5.
Collections on account Collections of
accrued revenues
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O IF I COULD ONLY REMEMBER THE ELEMENTS OF THE
STATEMENT OF CASH FLOWS!

• Operating activities
• Investing activities
• Financing activities
• HAPPINESS IS A POSITIVE OPERATING CASH FLOW!

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INVESTMENTS

• Intent determines investment classification
• Short-term-Usually a parking place for excess
  cash.
• Long-term-various reasons

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RECEIVABLES

• Arise from earning revenue that will be collected
  in the future.
• Examples
• Sale on account
• Accrual of revenues
• Interest
• Rent
• Commissions

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UNEXPIRED COSTS

• Assets that will be used in operations.
• Examples
• Inventory
• Fixed assets (PPE)
• Supplies prepayments
• Office supplies
• Prepaid insurance

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Liabilities I owe, I owe, so off to work I go. I
owe, I owe, I owe.

• To vendors on account
• To debt holders
• To various entities for
• Accrued liabilities
• Agency collections
• To shareholders for cash dividends declared
• For unearned revenue

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Equity or Net Worth (A L E)

• The nature and source of equity is the same for
  all entities.
• The presentation of equity will vary based on the
  type of entity.
• The statement of changes in equity (IDRE
  statement) is one of the four primary financial
  statements.

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IDRE Statement

• I Additional owner
  investments
• D Dividends
• R Revenues
• E Expenses

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AL IDRE-Another view