THE ACCOUNTING INFORMATION SYSTEM Accounting, Fourth Edition 3 Analyze the effec

THE ACCOUNTING INFORMATION SYSTEM Accounting, Fourth Edition 3 Analyze the effec www.phwiki.com

THE ACCOUNTING INFORMATION SYSTEM Accounting, Fourth Edition 3 Analyze the effec

Ramirez, David, Host has reference to this Academic Journal, PHwiki organized this Journal THE ACCOUNTING INFORMATION SYSTEM Accounting, Fourth Edition 3 Analyze the effect of business transactions on the basic accounting equation. Explain what an account is in addition to how it helps in the recording process. Define debits in addition to credits in addition to explain how they are used to record business transactions. Identify the basic steps in the recording process. Explain what a journal is in addition to how it helps in the recording process. Explain what a ledger is in addition to how it helps in the recording process. Explain what posting is in addition to how it helps in the recording process. Explain the purposes of a trial balance. Classify cash activities as operating, investing, or financing. Study Objectives

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Debits in addition to credits Debit in addition to credit procedures Stockholders’ equity relationships Summary of debit/credit rules Accounting Transactions The Account Steps in the Recording Process The Recording Process Illustrated The Trial Balance Analyzing transactions Summary of transactions The journal The ledger Chart of accounts Posting Summary illustration of journalizing in addition to posting Limitations of a trial balance The Accounting In as long as mation System The Accounting In as long as mation System Accounting In as long as mation System System of collecting in addition to processing transaction data in addition to communicating financial in as long as mation to decision makers. Most businesses use computerized accounting (EDP) systems. Transactions are economic events that require recording in the financial statements. Not all activities represent transactions. Assets, liabilities, or stockholders’ equity items change as a result of some economic event. Dual effect on the accounting equation. Accounting Transactions

Question: Are the following events recorded in the accounting records Event Purchase computer. Criterion Is the financial position (assets, liabilities, or stockholders’ equity) of the company changed Pay rent. Record/ Don’t Record Accounting Transactions Discuss guided trip options with potential customer. Illustration 3-1 Assets Liabilities Stockholders’ Equity = + Analyzing Transactions SO 1 Analyze the effect of business transactions on the basic accounting equation. Basic Accounting Equation Accounting Transactions The process of identifying the specific effects of economic events on the accounting equation. Analyzing Transactions SO 1 Analyze the effect of business transactions on the basic accounting equation. Accounting Transactions Illustration 3-2 Exp in addition to ed accounting equation

Illustration: 1. On October 1, cash of $10,000 is invested in Sierra Corporation by investors in exchange as long as $10,000 of common stock. Accounting Transactions 1. +10,000 +10,000 SO 1 Analyze the effect of business transactions on the basic accounting equation. 2. On October 1, Sierra borrowed $5,000 from Castle Bank by signing a 3-month, 12%, $5,000 note payable. Accounting Transactions 1. +10,000 +10,000 2. +5,000 +5,000 SO 1 Analyze the effect of business transactions on the basic accounting equation. 3. On October 2, Sierra purchased equipment by paying $5,000 cash to Superior Equipment Sales Co. Accounting Transactions 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 SO 1 Analyze the effect of business transactions on the basic accounting equation.

4. On October 2, Sierra received a $1,200 cash advance from R. Knox, a client. Accounting Transactions 4. +1,200 +1,200 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 SO 1 Analyze the effect of business transactions on the basic accounting equation. 5. On October 3, Sierra received $10,000 in cash from Copa Company as long as guide services per as long as med. Accounting Transactions 4. +1,200 +1,200 5. +10,000 +10,000 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 SO 1 Analyze the effect of business transactions on the basic accounting equation. 6. On October 3, Sierra Corporation paid its office rent as long as the month of October in cash, $900. Accounting Transactions 4. +1,200 +1,200 5. +10,000 +10,000 6. -900 -900 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 SO 1 Analyze the effect of business transactions on the basic accounting equation.

7. On October 4, Sierra paid $600 as long as a one-year insurance policy that will expire next year on September 30. Accounting Transactions 4. +1,200 +1,200 5. +10,000 +10,000 6. -900 -900 7. -600 +600 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 SO 1 Analyze the effect of business transactions on the basic accounting equation. 8. On October 5, Sierra purchased supplies on account from Aero Supply as long as $2,500. Accounting Transactions 4. +1,200 +1,200 5. +10,000 +10,000 6. -900 -900 7. -600 +600 8. +2,500 +2,500 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 SO 1 Analyze the effect of business transactions on the basic accounting equation. 10. On October 20, Sierra paid a $500 dividend. Accounting Transactions 4. +1,200 +1,200 5. +10,000 +10,000 6. -900 -900 7. -600 +600 8. +2,500 +2,500 10. -500 -500 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 SO 1 Analyze the effect of business transactions on the basic accounting equation.

11. Employees have worked two weeks, earning $4,000 in salaries, which were paid on October 26. Accounting Transactions 4. +1,200 +1,200 5. +10,000 +10,000 6. -900 -900 7. -600 +600 8. +2,500 +2,500 10. -500 -500 11. -4,000 -4,000 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 Record of increases in addition to decreases in a specific asset, liability, equity, revenue, or expense item. Debit = “Left” Credit = “Right” Account An Account can be illustrated in a T-Account as long as m. SO 2 Explain what an account is in addition to how it helps in the recording process. The Account

Double-entry system Each transaction must affect two or more accounts to keep the basic accounting equation in balance. Recording done by debiting at least one account in addition to crediting another. DEBITS must equal CREDITS. SO 3 Define debits in addition to credits in addition to explain their use in recording business transactions. Debit in addition to Credit Procedures The Account If Debits are greater than Credits, the account will have a debit balance. $10,000 Transaction 2 $3,000 $15,000 8,000 Transaction 3 Balance Transaction 1 SO 3 Define debits in addition to credits in addition to explain their use in recording business transactions. Debit in addition to Credit Procedures $10,000 Transaction 2 $3,000 Balance Transaction 1 $1,000 8,000 Transaction 3 SO 3 Define debits in addition to credits in addition to explain their use in recording business transactions. Debit in addition to Credit Procedures If Credits are greater than Debits, the account will have a credit balance.

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Assets – Debits should exceed credits. Liabilities – Credits should exceed debits. The normal balance is on the increase side. Dr./Cr. Procedures as long as Assets in addition to Liabilities SO 3 Define debits in addition to credits in addition to explain their use in recording business transactions. Owner’s investments in addition to revenues increase stockholders’ equity (credit). Dividends in addition to expenses decrease stockholder’s equity (debit). Dr./Cr. Procedures as long as Stockholders’ Equity SO 3 Define debits in addition to credits in addition to explain their use in recording business transactions. The purpose of earning revenues is to benefit the stockholders. The effect of debits in addition to credits on revenue accounts is the same as their effect on stockholders’ equity. Expenses have the opposite effect: expenses decrease stockholders’ equity. SO 3 Define debits in addition to credits in addition to explain their use in recording business transactions. Dr./Cr. Procedures as long as Revenue in addition to Expense

Stockholders’ Equity Relationships Illustration 3-15 SO 3 Define debits in addition to credits in addition to explain their use in recording business transactions. Normal Balance Credit Normal Balance Debit Summary of Debit/Credit Rules SO 3 Define debits in addition to credits in addition to explain their use in recording business transactions. Balance Sheet Income Statement = + = – Asset Liability Equity Revenue Expense Debit Credit Summary of Debit/Credit Rules SO 3 Define debits in addition to credits in addition to explain their use in recording business transactions.

One difference between IFRS in addition to GAAP is that: GAAP uses accrual-accounting concepts in addition to IFRS uses primarily the cash basis of accounting. IFRS uses a different posting process than GAAP. IFRS uses more fair value measurements than GAAP. the limitations of a trial balance are different between IFRS in addition to GAAP. Copyright © 2011 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request as long as further in as long as mation should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies as long as his/her own use only in addition to not as long as distribution or resale. The Publisher assumes no responsibility as long as errors, omissions, or damages, caused by the use of these programs or from the use of the in as long as mation contained herein. Copyright

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