chapter 3 - Chapter 3 The Ac countin g Info rmation S ystem...

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1 Chapter 3: The Accounting Information System I. The Accounting Information System : A. Accounting information system -> the system of collecting and processing transaction data and communicating financial information to decision makers. B. Factors that shape these systems include: 1. The nature of the company’s business 2. The types of transactions 3. The size of the company 4. The volume of the data 5. The information demands of management and others. II. Accounting Transactions : A. Accounting transaction -> economic event that requires recording in the financial statements. B. Not all economic events require recording. C. An accounting transaction occurs when assets, liabilities, or stockholders’ equity items change as a result of some economic event. D. Analyzing Transactions: 1. Transaction analysis -> the process of identifying the specific effects of economic events on the accounting equation (assets=liabilities + equity). 2. Because the accounting equation must always balance, every transaction has a dual effect on the equation. 3. For example, if an individual asset is increased, there must be a corresponding: Decrease in another asset, or Increase in a specific liability, or Increase in stockholders’ equity 4. Investment of Cash By Stockholders: The source of each change to stockholders’ equity is noted to the right of the transition. 5. Note Issued in Exchange for Cash: Assets/liabilities (notes payable). 6. Purchase of Office Equipment: Decrease in assets (cash) and an increase in assets (PPE). 7. Receipt of Cash in Advance From Customer: Although a company may receive cash from a customer in advance, it does not record revenue until it has performed the work. Record as unearned revenue.
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chapter 3 - Chapter 3 The Ac countin g Info rmation S ystem...

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