2. Analyzing Transactions (economic events) a. Step 1: Identify the accounts affected by the transaction, and what type of account they are. b. Step 2: Determine if the accounts are increasing and decreasing. c. Step 3: Record the increase or decrease into the tabular analysis. Remember, we only record transactions if the financial position (assets, liabilities or owner's equity) of the company are changed. Practice Exercise: Select transactions for Drake Company are as follows: 1. Made cash investments to start a business. 2. Purchased equipment on account. 3. Incurred advertising expense on account. 4. Paid salaries. 5. Billed customers for services performed. Instructions: For each transaction, describe the effect of each transaction on assets, liabilities and owner's equity