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ch03 - CHAPTER 3 The Accounting Information System CHAPTER...

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CHAPTER 3 The Accounting Information System CHAPTER OVERVIEW Chapter 3 shows you how to analyze transactions and their effect on the accounting equation. You will learn about accounts and debits and credits and how to perform the basic steps in the recording process: journalizing, posting transactions to the ledger, and preparing a trial balance. REVIEW OF SPECIFIC STUDY OBJECTIVES SO1. Analyze the effect of business transactions on the basic accounting equation. ¿ The accounting information system is the system of collecting and processing transaction data and communicating financial information to decision makers . ¿ Accounting transactions are economic events that require recording in the financial statements . An accounting transaction occurs when assets, liabilities, or stockholders' equity items change as a result of an economic event . ¿ Transaction analysis is the process of identifying the specific effects of economic events on the accounting equation . The accounting equation must always be in balance after a transaction is recorded. Remember: It is a mathematical equation. If a stockholder invests cash in the business, then cash on the left side of the equation increases while stockholders' equity on the right side of the equation increases by the same amount.
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