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2331 Chapters 1&2 Lazer 2010 - Part 2 - Student - 6pp

2331 Chapters 1&2 Lazer 2010 - Part 2 - Student -...

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Dr. Ron Lazer Chapters 1&2-Part 2, Page 1 Chapters 1 & 2 (Part 2): The Financial Statements & Transaction Analysis Dr. Ron Lazer Second Quiz square6 Date: square6 Content: Chapters 1&2 – part 2 (specific instructions will be provided during class) square6 Allowed material: 4 function calculator Ron Lazer, Ph.D. Financial Accounting GAAP (Generally Accepted Accounting Principles) The Accounting Information System Financial Statements Transaction Analysis Financial Statements Ron Lazer, Ph.D. Today’s class objectives The Accounting Information System Double Entry Accounting The Accounting Cycle Ron Lazer, Ph.D. How do you handle many transactions? square6 The transaction analysis of Kingsbery Automotive Services used a few transactions and accounts. However, with thousands of transactions and hundreds of accounts, the spreadsheet program is not sufficient. square6 Therefore accountants use a “double entry” system based on debits and credits. square6 Each transaction must still be analyzed to determine which accounts are involved, whether the accounts increase or decrease, and how much the balance will change. square6 The balance sheet equation can be used for this analysis, but with so many transactions, this is not realistic. square6 In practice, accountants use ledgers . Double-Entry Accounting square6 Account – a summary device box2 Detailed record of increases and decreases in specific assets, liabilities, or stockholders’ equity during a period box2 Each column under the accounting equation is an account square6 Ledger - a group of related accounts kept current in a systematic manner box2 Think of a ledger as a book with one page for each account box2 The ledger is a company’s “books” square6 Journal – the chronological record of transactions
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Dr. Ron Lazer Chapters 1&2-Part 2, Page 2 Double-Entry Accounting T-Accounts square6 A simplified version of a ledger account is called the T-account .
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