What is the process of determining how an economic event impacts financial statements known as?

The process of determining how an economic event impacts financial statements is known as transaction analysis. This fundamental accounting practice involves identifying, recording, and analyzing the effects of specific economic events on the financial statements of a business. Transaction analysis specifically focuses on understanding how transactions, such as sales, purchases, or other financial activities, correlate with the accounting equation (Assets = Liabilities + Equity).

Through transaction analysis, accountants assess the nuances of each transaction, distinguishing how they affect various accounts in the ledger. This clarity is crucial for preparing accurate financial statements that faithfully represent the company's financial position and performance.

The other options, while related to financial practices, do not specifically address this foundational process. Financial analysis relates to evaluating financial data to inform decisions, statement adjustments refer to modifications made to financial statements under specific conditions, and the auditing process is concerned with examining financial records for accuracy and compliance but not with the initial analysis of how specific transactions affect the financial statements. Therefore, transaction analysis is the most precise term for this process.