ch 2 LN Accounting Cycle including financial ratios

ch 2 LN Accounting Cycle including financial ratios - 2-1Ch...

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Unformatted text preview: 2-1Ch 2: Review of Accounting CycleLearning Objectives1.Identify and explain the basic steps in the accounting process (accounting cycle).2.Analyze transactions and make and post journal entries.3.Make adjusting entries, produce financial statements, and close nominal accounts.4.Distinguish between accrual and cash-basis accounting.2-2Identify and explain the basic steps in the accounting process (accounting cycle).OBJECTIVE 12-3Analyze transactions and make and post journal entries.OBJECTIVE 23-Step Journal Entry Process•Identify the accounts involved with an event or transaction.•Determine whether each account increased or decreased.•Determine the amount by which each account was affected.2-4Double-Entry Accounting•An old and universally accepted system for recording accounting data.•Each transaction/ business event is recorded to maintain the equality of the basic accounting equation:Assets=LiabilitiesOwners’ Equity+2-5•A debit is an entry on the left side of an account.Double-Entry Accounting•Assets, expenses, and dividends are increased by debits and decreased by credits.•A credit is an entry on the right side of an account.•Liabilities, capital stock, retained earnings, and revenues are increased by credits and decreased by debits.2-62-7Journalizing Transactions•The general journal is used to record all transactions for which a special journal is not maintained.•A special journal is used to record a particular type of frequently recurring transaction.•sales, purchases, cash disbursements, cash receipts2-8DateDescriptionPost.Ref. DebitCreditGENERAL JOURNALPage 242011July 1Dividends33025,000Dividends Payable26025,000Declared semiannualcash dividend on common stock. 10Equipment1807,500Notes Payable2207,500Issued note for new equipment. .2-9•An account is used to summarize the effects of transactions on each element of the expanded accounting equation.•A ledger is a collection of accounts maintained by a business.•The transfer of information from the journal to the appropriate account in the ledger is referred to as posting.Posting to the Ledger Accounts2-10Posting to the Ledger AccountsAccountEQUIPMENTAccount No. 180Date Item Ref. Debit Credit BalanceGENERAL LEDGER(continues)2011 July lBalanceI10,55010Purchase EquipmentJ247,50018,050Post.2-11Posting to the Ledger AccountsAccount No. 2202011 July lBalanceI5,75010Purchase EquipmentJ247,50013,250GENERAL LEDGERDate Item Ref. Debit Credit BalancePost....
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This note was uploaded on 12/07/2009 for the course ACCT ACCT 203 taught by Professor Kim during the Fall '09 term at HKUST.

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ch 2 LN Accounting Cycle including financial ratios - 2-1Ch...

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