ACCT 327 Chp 3

ACCT 327 Chp 3 - ACCT327 Chapter3...

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ACCT 327  Chapter 3
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Accounting Information System collects and processes transaction data  and then disseminates the financial info to  interested parties.
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Double-entry Accounting  System provides a logical method for recording  transactions; it also offers a means of  proving the accuracy of the recorded  amounts.
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Events are of two types: External events: involve interaction between an  entity and its environment, such as a transaction  with another entity, a change in the price of a good  that an entity buys, a flood or earthquake, or an  improvement in technology by a competitor Transactions are types of external events Internal events: occur within an entity, such as  using buildings and machinery in operations, or  transferring or consuming raw materials in  production processes. In short, an enterprise records as many events as  possible that affect its financial position
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General Ledger The general ledger contains all the asset,  liability, and stockholders’ equity accounts
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General Journal Chronologically lists transactions and  other events, expressed in terms of debits  and credits to accounts Each general journal entry consists of four  parts: The accounts and amounts to be debited The accounts and amounts to be credited A date An explanation
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Special Journals Summarize transactions possessing a  common characteristic; reduces  bookkeeping time
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Receipt of Cash for Future  Service October 2: Pioneer Advertising receives a  12,000 cash advance from a client for  advertising services that are expected to  be completed by December 31. Cash                                     12000        Unearned Revenue                  12000 
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Payment for Insurance October 4: Pioneer Advertising pays 6000  for a one year insurance policy that will  expire next year on September 30. Prepaid Insurance Cash 6000 6000
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Declaration and Payment of  Dividend by Corporation October 4: Pioneer Advertising’s board of  directors declares and pays a 5000 cash  dividend to stockholders Dividends Cash 5000 5000
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The procedures for preparing a  Trial Balance consists of: Listing the account titles and their  balances Totaling the debit and credit columns Proving the equality of the two columns
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Adjusting Entries Ensure that companies follow the revenue  recognition and matching principles The use of adjusting entries makes it  possible to report on the balance sheet the  appropriate assets, liabilities, and SHE at  the statement date, as well as the proper  revenues and expenses on the income  statement
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ACCT 327 Chp 3 - ACCT327 Chapter3...

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