diff --git a/src/TransactionEngine.cpp b/src/TransactionEngine.cpp
new file mode 100644
index 0000000000..34a77ace8d
--- /dev/null
+++ b/src/TransactionEngine.cpp
@@ -0,0 +1,83 @@
+
+#include "TransactionEngine.h"
+#include "TransactionFormats.h"
+
+TransactionEngineResult TransactionEngine::applyTransaction(const SerializedTransaction& txn,
+	TransactionEngineParams params)
+{
+	uint256 txID = txn.getTransactionID();
+	if(!txID) return terINVALID;
+
+	// extract signing key
+	CKey acctKey;
+	if (!acctKey.SetPubKey(txn.getRawSigningAccount())) return terINVALID;
+
+	// check signature
+	if (!txn.checkSign(acctKey)) return terINVALID;
+
+	// WRITEME: Check fee
+
+	// get source account ID
+	uint160 srcAccount = txn.getSigningAccount();
+	if (!srcAccount) return terINVALID;
+
+	boost::recursive_mutex::scoped_lock sl(mLedger->mLock);
+
+	// find source account
+	LedgerStateParms qry = lepNONE;
+	SerializedLedgerEntry::pointer src = mLedger->getAccountRoot(qry, srcAccount);
+	if(!src) return terNO_ACCOUNT;
+
+	// validate sequence
+	uint32 t_seq = txn.getSequence();
+	uint32 a_seq = src->getIFieldU32(sfSequence);
+	if (t_seq != a_seq)
+	{
+		// WRITEME: Special case code for changing transaction key
+		if (a_seq < t_seq) return terPRE_SEQ;
+		if (mLedger->hasTransaction(txID))
+			return terALREADY;
+		return terPAST_SEQ;
+	}
+
+	TransactionEngineResult result = terUNKNOWN;
+	switch(txn.getTxnType())
+	{
+		case ttINVALID:
+			result = terINVALID;
+			break;
+
+		case ttMAKE_PAYMENT:
+			result = doPayment(txn, *src);
+			break;
+
+		case ttINVOICE:
+			result = doInvoice(txn, *src);
+			break;
+
+		case ttEXCHANGE_OFFER:
+			result = doOffer(txn, *src);
+			break;
+
+		default:
+			result = terUNKNOWN;
+			break;
+	}
+
+	if (result == terSUCCESS)
+	{ // Write back the source account state and add the transaction to the ledger
+		// WRITEME: Special case code for changing transaction key
+		src->setIFieldU32(sfSequence, t_seq);
+		if(mLedger->writeBack(lepNONE, src) & lepERROR)
+		{
+			assert(false);
+			return terFAILED;
+		}
+
+		Serializer s;
+		txn.add(s);
+		mLedger->addTransaction(txID, s);
+	}
+
+	return result;
+}