4Transaction+Processing+in+AIS+1_Class

4Transaction+Processing+in+AIS+1_Class - Transaction...

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Transaction Processing Part I ACG3481 Prof. David Reppenhagen
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The Accounting Equation A = L + OE - Owner Withdrawals + Owner Investments - Expenses - Losses + Revenue + Gains
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Accounting Equation for a Corporation A = L + SE + Retained Earnings + Paid-in Capital - Expenses - Losses + Revenues + Gains - Dividends
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A Financial Transaction is. .. an economic event that affects the assets and equities of the firm, is reflected in its accounts, and is measured in monetary terms. similar types of transactions are grouped together into three transaction cycles: the expenditure cycle the conversion cycle the revenue cycle 4
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Relationship between Transaction Cycles 5 Figure 2-1
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Each Cycle has Two Primary Subsystems Expenditure Cycle: time lag between the two due to credit relations with suppliers: physical component (acquisition of goods) financial component (cash disbursements to the supplier) Conversion Cycle : the production system (planning, scheduling, and control of the physical product through the manufacturing process) the cost accounting system (monitors the flow of cost information related to production) Revenue Cycle: time lag between the two due to credit relations with customers : physical component (sales order processing) financial component (cash receipts) 6
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Source documents Record in Journal Financial Statements Transaction Analysis Post to Ledger Unadjusted Trial Balance Record & Post Adjusting Entries Adjusted Trial Balance Close Temporary Accounts Post-Closing Trial Balance The Accounting Processing Cycle During the Accounting Period At the End of the Accounting Period At the End of the Year
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Accounting cycle Obtain information about external transactions from source documents. Check stubs Invoices Receipts Remittance advices Analyze transactions. Accounts affected? Increase or decrease? Account type? Debit or credit? Debits equal credits?
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Accounting cycle Record transactions in a journal. General journal is the most common Sometimes referred to as the “book of original entry” Transactions recorded chronologically Post transactions to ledger. Reorganizes information by account Often handled with information technology today
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Journal Entries 1/2 Purchase of a $100,000 building for $40,000 cash and a $60,000 mortgage How do we account for this? Debits & Credits?
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Accounting Processing Cycle On January 1, $40,000 was borrowed from a bank On January 1, $40,000 was borrowed from a bank and a note payable was signed. and a note payable was signed. Prepare the journal entry. Two accounts are affected:
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Appendix 2C: Special Journals Special journals are used to capture the dual effect of repetitive types of transactions in debit/credit form. Special journals simplify the recording process in the following ways:
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4Transaction+Processing+in+AIS+1_Class - Transaction...

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