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chapter3notes - Ch. 3 Processing Accounting Information I....

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Ch. 3 – Processing Accounting Information I. TRANSACTION ANALYSIS - Using the “Accounting Equation” Economic events are the basis for recording transactions in the accounting system. For every transaction, it is essential to analyze its effect on the accounting equation. Example - Keeping the Accounting Equation in balance. 1. Owner invests $1,000 cash 2. Obtains loan from bank for $5,000. 3. Purchased supplies for $2,000, paid cash. 4. Received $3,000 cash from customer for 3 jobs to be performed in future. (Fee for each job is $1,000) 5. Owner withdrew $500 for personal use. 6. Performed a job for a fee of $700. Customer paid in cash. 7. Performed job for customer for a fee of $900. Customer will pay next month. 8. Paid employees wages of $1,500. 9. Completed one job for customer in #4 above. 10. Supplies on hand at the end of the month are $800. Assets = Liabilities + Stockholder Equity Cash Accounts Receivable Supplies = Note Payable Unearned Fees Common Retained Earnings Revenue (Expense) Exercise:
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Given the following information, answer the questions below: Revenue, 2006 $ 24,000 Liabilities – Dec. 31, 2006 25,000 Issuance of Common Stock 4,000 Dividends, 2006 12,000 Stockholder Equity – Jan 1, 2006 27,000 Stockholder Equity – Dec.31,2006 35,000 a. What are the total assets on December 31, 2006? b.
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This note was uploaded on 03/27/2008 for the course ACCT 229 taught by Professor Strawser during the Fall '06 term at Texas A&M.

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chapter3notes - Ch. 3 Processing Accounting Information I....

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