Acct Chap 3 - 1 Chapter 3 Processing Accounting Information...

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Unformatted text preview: 1 Chapter 3 Processing Accounting Information A n n u a l R e p o r t 2 Economic Events and Transactions ● An ECONOMIC EVENT is “a happening of consequence to an entity” ● Events may be internal or external ● A TRANSACTION is an event that can be measured and is recognized in a set of financial statements 3 External vs. Internal Events external events: interaction between entity and outside environment internal events: interaction within entity 4 Source Documents Evidence needed in an accounting system to record transactions Purchase Invoice Cash Register Tape Sales Invoice Receiving Document Payroll Records Shipping Document Checks 5 The Accounting Equation (your “new best friend”) ● Assets = Liabilities + O/E + Revenues – Expenses ● Economic events are basis for recording transactions in an accounting system ● Every transaction can be analyzed through its effect on the accounting equation LET’S LOOK AT SOME TRANSACTIONS…. 6 Assets = Liab. + O/E + Rev – Exp. Cash Capital Stock + 100,000 = + 100,000 The accounting equation must always remain in balance Issue capital stock for cash 1/04 Transactions for Glengarry Health Club Stock Certificate 7 Assets = Liab. + O/E + Rev. – Exp. Land Note Pay. + $50,000 + $200,000 Building + $150,000 Purchase of property in exchange for note payable Increase on left has corresponding increase on right 8 Assets = Liab. + O/E...
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Acct Chap 3 - 1 Chapter 3 Processing Accounting Information...

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