1. Basic concepts

$8 800 (Cash) + $1 200 (Vehicles) + $500 (Cheese) + $10 (Pizza base) + $300 (Salami) + $40(Olives) = $850 (Liabilities) + $ 10 000 (Owner’s Equity).

When Taras pays for the ingredients, the circle will be decreased. The transaction will have the following view:

The company’s Cash is decreased, since the Cash amount is Debit – Credit, the Credit part should be increased. The other explanation

– the company’s Cash is decreased, it is bad for the company, so the Credit part is used, the debt to the Super market is decreased, it is good for the company, so the Debit

part is used.

The circle is decreased and will have the following view:

Figure 1.4 Company balances after payment

The circle shows the current snapshots of the accounts totals. The transaction information must be stored separately for each account, if we look, for example, at the Cash account, we can get the following information:

In this case, we can understand why our company has only $7 950 cash. You can note that it is not clear why the Cash was increased by $10 000 or decreased by $850 and you will be right. To

understand what happened, we should look at all accounts that were involved in one transaction. For