ch03 - Chapter 3 1 Chapter 3: The Accounting Information...

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Unformatted text preview: Chapter 3 1 Chapter 3: The Accounting Information System AIM 3331-0U1 Summer 2009 Xinyi Lu Chapter 3 2 Todays Tasks 1. Review basic accounting terminology. 2. Explain double-entry rule. 3. Identify steps in the accounting cycle. 4. Demonstrate how to prepare each step. Chapter 3 3 Accounting Information System (AIS) To achieve the objective of accounting, a reliable information system is needed. AIS collects and processes transaction data and disseminates the information to interested parties. Factors shape AIS: Nature of business; Transactions; Firm size; Data volume; Information demands, etc. Chapter 3 4 What a good AIS could do? A good AIS can answer following questions as: How much and what kind of debt is outstanding? Were sales higher this period than last? What assets do we have? What were our cash inflows and outflows? Did we make a profit last period? Other question Chapter 3 5 Basic Accounting Terminology Event Transaction Account Real Account Nominal Account Ledger Journal Posting Trial Balance Adjusting Entries Financial Statements Closing Entries Chapter 3 6 Event A happening of consequence. Generally, its the source of cause of changes in assets, liabilities, and equity. Types of Events: External between a business and its environment. Internal event occurring entirely within a business. Chapter 3 7 Transaction An external event involving a transfer or exchange between two or more entities. Examples: purchases of material, sales of goods, investments by owners, distributions to owners, payment of taxes, casualty losses, charitable contributions, and so on. Chapter 3 8 Account A systematic arrangement that shows the effect of transactions and other events on a specific element (asset, liability, and so on). Keep a separate account for each asset, liability, revenue, and expense, and equity capital. Chapter 3 9 Real Accounts and Nominal Accounts Real (permanent) accounts: Assets, liability, equity accounts. Appear on the balance sheet. Real accounts are no closed. Nominal (temporary) accounts: Revenue, expense, and dividend accounts. Except for dividends , nominal accounts appear on the income statement. Nominal accounts are closed periodically. Chapter 3 10 Ledger Ledger : the book (or computer printouts) containing the accounts. General ledger : a collection of all the asset, liability, equity, revenue, and expense accounts. Subsidiary ledger : contains the details related to a given general ledger account....
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This note was uploaded on 08/06/2009 for the course BUSINESS 4444 taught by Professor Dr.dale during the Spring '09 term at University of Texas at Dallas, Richardson.

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ch03 - Chapter 3 1 Chapter 3: The Accounting Information...

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