Chapter+3+with+answers

Chapter+3+with+answers - Chapter 3: Accounting Information...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 3: Accounting Information System Read: Chapter 3 In-class exercise: EX3-1, EX 3-2, BE3-10, EX3-14, EX3-18, EX 3-12, EX 3-13 Practice exercise: EX3-4, EX3-15, EX3-19, P3-16, P3-9 (a) 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Basic Terminology Event The cause of changes of assets, liabilities, and equity Transaction A transfer or exchange between two or more entities or parties Account Where transactions are recorded (A separate account is used for each asset, liability, revenue, expense, gain, loss and capital) Permanent accounts (or “real” accounts) Temporary accounts (or “nominal” accounts) Asset, liability, and equity accounts Revenue, expense, and dividend accounts Appear on the balance sheet Revenue and expenses are on the income statement; dividends are on the equity statement Permanent accounts are not closed at year end Temporary accounts are closed at year end Journalizing A Journal is a book of original entry for all transactions The General Journal is a chronological listing of transactions expressed as debits and credits to particular accounts (known as a journal entry) 2
Background image of page 2
Special Journals are used to summarize transactions with common characteristics (e.g. cash receipts, sales, purchases) Ledger Book (electronic database) containing all accounts Each account has a separate page General ledger contains all asset, liability, and all equity related accounts (capital, revenue, and expenses) Subsidiary ledger contains details related to a specific general ledger account (example: accounts receivable subsidiary ledger) 3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Debit (Dr.): To record or enter an amount on the left side of a general ledger account Credit (Cr.): To record or enter an amount on the right side of a general ledger account This system of recording transactions is referred to as the double-entry accounting system; the two-sided effect of each transaction is recorded in appropriate accounts When a transaction is “in balance”, the debits equal the credits 4
Background image of page 4
The Rules of Debit and Credit Account Debit Credit Assets Increase Decrease Liabilities Decrease Increase Shareholders’ Equity Decrease Increase Revenue Decrease Increase Expenses Increase Decrease The Accounting Equation Assets = Liabilities + Shareholders’ Equity Example: Invested $10,000 cash and equipment valued at $15,000 in the business +25,000 Assets = +25,000 SE Paid office rent $2,000 for the month -$2,000 Assets = -$2,000 SE Received $5,000 from customer on consulting services provided +$5,000 Assets = +5,000 SE Buy $1,000 inventory on credit +$1,000 Assets = +$1,000 Liabilities 5
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The Accounting Cycle Analyse the transaction Journalize the transaction Post the transaction to general ledger (and sub-ledgers) accounts Prepare the (unadjusted) trial balance Prepare necessary adjusting journal entries Prepare the (adjusted) trial balance Prepare financial statements Prepare closing journal entries for the year 6
Background image of page 6
Example: EX 3-1 Apr. 2 Cash 15,000 Equipment
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 27

Chapter+3+with+answers - Chapter 3: Accounting Information...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online