We are now ready to begin operating our firm, BIS Ltd.
In order to obtain a quick and thorough understanding of financial accounting theory and practice we shall use “typical transactions”, namely, those which have unique double entry entries in the ledgers. These transactions will be repeated many times, successively, during the lifetime of any company.
Each transaction will maintain the equality of the accounting equation:
Total assets equals Total liabilities + Equity + Revenue/Expense
Typical transactions are unique in the combination of debit and credit entries used to record them. Typical transactions are those unique events that will occur during the operation of our simulated firm:
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