3achapter3

3achapter3 - Tools for Business Decision Making, 4th Ed....

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1 3-1 Bob Anderson, UCSB 2004 Financial Accounting: Tools for Business Decision Making, 4th Ed. Kimmel, Weygandt, Kieso CHAPTER 3 3-2 Bob Anderson, UCSB 2004 Chapter 3 The Accounting Information System ± Analyze the effect of business transactions on the basic accounting equation. ± Explain what an account is and how it helps in the recording process. ± Define debits and credits and explain how they are used to record business transactions. ± Identify the basic steps in the recording process. 3-3 Bob Anderson, UCSB 2004 Chapter 3 The Accounting Information System ± Explain what a journal is and how it helps in the recording process. ± Explain what a ledger is and how it helps in the recording process. ± Explain what posting is and how it helps in the recording process. ± Explain the purposes of a trial balance. 3-4 Bob Anderson, UCSB 2004 External and Internal Events External Event – interaction between a business and its environment. Internal Event – event occurring entirely within a business. Transaction – any event that is recognized in a set of financial statements. RECOGNIZED- An accounting entry is recorded… it becomes reflected in the financial statements. REALIZED- regardless of whether it results in an accounting entry, the business actually receives or gives something.
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2 3-5 Bob Anderson, UCSB 2004 Exercise – Types of Events 1. A supplier of a company‘s raw material is paid an amount owed on account. External Internal Not Recorded 2. A customer pays its open account. 3. A new chief executive officer is hired. 4. The biweekly payroll is paid. 5. Raw materials are entered into production. 6. A new advertising agency is hired. 7. The accountant determines the federal income taxes owed based on the income earned. External External External Internal Internal Not Recorded Not Recorded 3-6 Bob Anderson, UCSB 2004 Source Document – a piece of paper that is used as evidence to record a transaction. Sales invoice Payroll timecard Utility bill Stock certificate Promissory note (note payable) Source Documents Payment terms are 2/10, n/30 NOTE: Not all recordable events are supported by a standard source document. 3-7 Bob Anderson, UCSB 2004 Exercise – Source Documents 1. Utilities expense for the month is recorded. 2. A cash settlement is received from a pending lawsuit. 3. Owners contribute cash to start a new corporation. 4. The biweekly payroll is paid. 5. Cash sales for the day are recorded.
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This note was uploaded on 08/06/2008 for the course ECON 3A taught by Professor Loster during the Summer '07 term at UCSB.

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3achapter3 - Tools for Business Decision Making, 4th Ed....

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