Chapter_3_The_Accounting_Information_System_Course_Notes

Chapter_3_The_Accounting_Information_System_Course_Notes -...

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CH 3 – THE ACCOUNTING INFORMATION SYSTEM 1. An Accounting Information System (AIS) collects and processes transaction data and disseminates the information to interested parties. Helps management answer such questions as: How much and what kind of debt is outstanding? Were sales higher this period than last? What assets do we have? What were our cash inflows and outflows? Did we make a profit last period? 2. Basic Terminology (see Textbook for definitions) Event Journal Transaction Posting Account Ledger Real Account Nominal Account Trial Balance Adjusting Entries Closing Entries Financial Statements
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CH 3 – THE ACCOUNTING INFORMATION SYSTEM 3. Debits and Credits An Account shows the effect of transactions on a given asset, liability, equity, revenue, or expense account. Double-entry accounting system (two-sided effect). Recording done by debiting at least one account and crediting another. DEBITS must equal CREDITS. AED = LRC After eating dinner, lets read comics (AED=LRC) ASSETS = LIABILITIES + EQUITY
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CH 3 – THE ACCOUNTING INFORMATION SYSTEM 4. Ownership Structure Ownership structure dictates the types of accounts that are part of the equity section. Proprietorship or Partnership Corporation Capital Account Drawings Account Common Stock Additional Paid-in Capital (APIC) Retained Earnings
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CH 3 – THE ACCOUNTING INFORMATION SYSTEM 5. Corporate Ownership Balance Sheet Stockholders’ Equity Common Stock (investment by stockholders Retained Earnings (net income retained in business) Dividends Net Income or Net Loss (Revenues less expenses) Income Statement Statement of Retained Earnings 7. The Accounting Cycle a. Analyze transactions b. Record in journal c. Post to ledger (T-accts) d. Trial Balance e. Adjustments f. Adjusted Trial Balance g. Prepare Financial Statements h. Closing entries i. Post-closing Trial Balance
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CH 3 – THE ACCOUNTING INFORMATION SYSTEM 10. Transactions and Events What to Record? FASB states, “transactions and other events and circumstances that affect a business enterprise.” Types of Events: External – between a business and its environment. Internal – event occurring entirely within a business. Review Transactions and Events: External (E), Internal (I) or Not Recorded (NR)? 1. A supplier of a company‘s raw material is paid an amount owed on account. 2. A customer pays its open account. 3. A new chief executive officer is hired. 4. The biweekly payroll is paid. 5. Raw materials are entered into production. 6.
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Chapter_3_The_Accounting_Information_System_Course_Notes -...

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