Chapter 03

Chapter 03 - Processing Accounting Information C h a p t e...

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Unformatted text preview: Processing Accounting Information C h a p t e r 3 External and Internal Events External events: interaction between entity and outside environment LO1 Internal events: Interaction within entity Typical 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 LO2 Lets Create a Company Assets = Liabilities + Owners’ Equity Cash Capital Stock + $ 100,000 = + $ 100,000 The accounting equation must always remain in balance Issue Capital Stock for Cash LO3 1/08 Transactions for Glengarry Health Club Purchase of Property in Exchange for Note Payable Increase on left has corresponding increase on right Assets = Liabilities + Owners’ Equity Land Note Payable + $50,000 = + $200,000 Building + $150,000 Assets = Liabilities + Owners’ Equity Equip. Accts. Pay. + $20,000 = + $20,000 Purchase of Equipment on Account At least two accounts affected by every transaction Revenue – Expenses = Net Income (loss ) Income Statement Statement of Retained Earnings Beg. R/E + Net Income (or – Net Loss) – Dividends = End. R/E Effect of Revenue and Expenses on Retained Earnings Sell Monthly Memberships on Account Assets = Liabilities + Owners’ Equity Accts. Rec. Retained Earnings + $15,000 = + $15,000 Revenues increase retained earnings Sell Court Time Assets = Liabilities + Owners’ Equity Cash Retained Earnings + $5,000 = + $5,000 Revenues increase retained earnings Assets = Liabilities + Owners’ Equity Cash Retained Earnings – $10,000 = – $10,000 Expenses decrease retained earnings Payment of Wages and Salaries Assets...
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This note was uploaded on 04/13/2011 for the course ACCT 2101 taught by Professor Christianwurst during the Spring '08 term at Temple.

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Chapter 03 - Processing Accounting Information C h a p t e...

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