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Chapter 03 - C h a p t e r 3 Processing Accounting...

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Processing Accounting Information C h a p t e r 3
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External and Internal Events External events: interaction between entity and outside environment LO1 Internal events: Interaction within entity
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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
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Lets Create a Company
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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
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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
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Assets = Liabilities + Owners’ Equity Equip. Accts. Pay. + $20,000 = + $20,000 Purchase of Equipment on Account At least two accounts affected by every transaction
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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
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Sell Monthly Memberships on Account Assets = Liabilities + Owners’ Equity Accts. Rec. Retained Earnings + $15,000 = + $15,000 Revenues increase retained earnings
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Sell Court Time Assets = Liabilities + Owners’ Equity Cash Retained Earnings + $5,000 = + $5,000 Revenues increase retained earnings
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Assets = Liabilities + Owners’ Equity Cash Retained Earnings – $10,000 = – $10,000 Expenses decrease retained earnings Payment of Wages and Salaries
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