Unit 1: Basic Accounting Fundamentals & Manual Accounting
Lesson 4: Identifying Transactions and Preparing Journal Entries
Before recording transactions, you first need to identify what happened, which accounts are affected, and whether those accounts increased or decreased. In this lesson, you’ll practice analyzing business transactions, identifying account categories and sub-accounts, and preparing for journal entries using the double-entry system.
Learning Objectives
By the end of this lesson, you will be able to:
- Identify business transactions.
- Identify the correct Chart of Accounts.
- Explain how transactions affect financial records.
- Prepare for recording journal entries.
- Every transaction affects at least two accounts.
- Always ask: What happened? Which accounts are affected? Did they increase or decrease?
- Choosing the correct account category is the first step before applying debits and credits.
- A well-organized Chart of Accounts makes bookkeeping more accurate.
Common Mistakes
❌ Identifying the wrong account category.
❌ Confusing assets with expenses.
❌ Jumping into debits and credits before identifying the transaction.
Practice Activity
For each transaction, identify:
- What happened?
- Account Category
- Suggested Sub-account
| Transaction | Category | Sub-account |
| Paid internet bill | ||
| Earned service income | ||
| Bought office equipment | ||
| Owner invested cash | ||
| Borrowed money from the bank |