Effect of Transactions on the Balance Sheet

Every transaction affects two accounts or items. One account is always debited and the other account credited.

This means that a balance is always maintained in the records. This is also reflected in the Balance Sheet where every transaction may affect two items, and a balance is always maintained.

Illustration of how transactions affect the balance sheet

(A)Owner puts $5,000 in the business bank account.

(B)Borrowed $ 4000 cash from E. Dennis.

(C)Bought Motor van for $459 cash

(D)Received cash of $150 from debtor V. Ryan.

(E)Bought Fixtures by cheque of $257.