5Transaction+Processing+in+AIS+1_Class-1

5Transaction+Processing+in+AIS+1_Class-1 - ACG3481...

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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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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.
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5Transaction+Processing+in+AIS+1_Class-1 - ACG3481...

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