Chapter 03 - Slides

Chapter 03 - Slides - Chapter 3 Objectives Review of the...

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Review of the Accounting Process Professor Dennis Chambers ACC 301 6/15/2007 ACC 301 2 Chapter 3 Objectives 1. Understand basic accounting terminology. 2. Explain double entry rules. 3. Identify steps in the accounting cycle. 4. Record transactions in journals, post to ledger accounts, and prepare a trial balance. 5. Explain the reasons for preparing adjusting entries. 6. Prepare closing entries. 7. Explain how inventory accounts are adjusted at year-end. 6/15/2007 ACC 301 3 Basic Terminology ± Transaction: ± An external event involving a transfer or exchange between two or more entities. ± Real Accounts: ± Real (permanent) accounts are assets, liability, and equity accounts; they appear on the balance sheet. ± Real accounts continue from one accounting cycle to the next. ± Nominal Accounts: ± Nominal (temporary) accounts are revenue, expense, and dividend accounts. Other than dividends, they appear on the income statement. ± Nominal accounts are closed out to Income Summary each accounting cycle ± Adjusting Entries: ± Entries made at the end of an accounting period to bring all accounts up to date on an accrual accounting basis. ± Closing Entries: ± Process by which all nominal accounts are reduced to zero and the net income or net loss is determined and transferred to an owners’ equity account (retained earnings). 6/15/2007 ACC 301 4 Basic Accounting Equation ± Assets = Liabilities + Owners Equity ± The equation must be in balance after every recorded transaction in the system.
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6/15/2007 ACC 301 5 Double entry accounting ± Accounting system based on certain rules:
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This note was uploaded on 01/20/2011 for the course ACC 301 taught by Professor Staff during the Fall '08 term at Kentucky.

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Chapter 03 - Slides - Chapter 3 Objectives Review of the...

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