Chapter 3 Slides - Chapter 3 The Accounting Information...

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1 Chapter 3 The Accounting Information System
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2 Debits vs. Credits Double-entry accounting system Debit on the left side vs. Credit on the right side Debit balance: asset, expense and dividend accounts Credit balance: liability, equity and revenue accounts
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3 Basic Equation Assets = Liabilities + Shareholders’ Equity Assets = Liabilities + Common Shares + Revenues – Expenses – Dividends An accounting transaction may influence both sides of the equation, or only one side of the equation. When a transaction is correctly recorded, the accounting equation will remain in balance.
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4 Ownership Structure What types of accounting transactions would affect owners’ equity? Investments by owners Revenues Expenses Dividends Corporations vs. Proprietorships and Partnerships
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5 The Accounting Cycle 1. Analyze the transaction 2. Journalize the transaction 3. Post the transaction to general ledger (and sub- ledgers) accounts 4. Prepare the (unadjusted) trial balance 5. Prepare necessary adjusting journal entries 6. Prepare the (adjusted) trial balance 7. Prepare financial statements 8. Prepare closing journal entries for the year 9. Prepare post-closing trial balance (optional) 10. Prepare reversing entries (optional)
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6 Step 1 - 3
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Chapter 3 Slides - Chapter 3 The Accounting Information...

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