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.