510chapter3fall2009bb

510chapter3fall2009bb - Chapter 3: The Accounting...

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Chapter 3: The Accounting Information System
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What’s Important Basic accounting terminology Identification and recording of journal entries Preparation of trial balances Adjusting journal entries Closing entries
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Inventory and cost of goods sold Reversing entries What’s Not on Exam
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Basic Elements of Accounting Assets : Probable future economic events obtained or controlled by a particular entity as a result of past transactions or events. Liabilities : Probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. Equity : Residual interest in the assets of an entity that remains after deducting its liabilities.
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Basic Elements Investments by Owners : Increases in net assets resulting from transfers by owners of something of value to obtain an increased ownership interest. Distributions to Owners : Decreases in net assets resulting from transferring assets, rendering services, or incurring liabilities by the enterprise to owners. Distributions decrease ownership interest in an enterprise.
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Basic Elements Revenues : Inflows or other enhancements of assets of an entity or settlement of its liabilities during a period from delivering or producing goods, rendering services, or other activities that constitute an entity’s major, ongoing operations. Expenses : Outflows or other using up of assets or incurrences of liabilities during a period from delivering or producing goods, rendering services, or carrying out other activities that constitute the entity’s ongoing, major or central operations.
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Basic Elements Gains : Increases in net equity from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity during a period except those that result from revenues or investments by owners. Losses : Decreases in equity from peripheral or incidental transactions of an entity and from all other transactions and other events and circumstances affecting the entity during a period except those that result from expenses or
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Basic Terminology Event Transaction Account Real Account Nominal Account Ledger Journal Posting Trial Balance Adjusting Entries Financial Statements Closing Entries
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Basic Terminology (cont’d) Double-entry Double-entry accounting system (two-sided effect). Recording done by debiting at least one account and crediting another. DEBITS must equal must equal CREDITS . An Account Account shows the effect of transactions on a given asset, liability, equity, revenue, or expense account.
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Account Name Debit / Dr. Credit / Cr.
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This note was uploaded on 12/29/2009 for the course ACC 5100 taught by Professor Andrews during the Fall '09 term at Wayne State University.

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510chapter3fall2009bb - Chapter 3: The Accounting...

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