chapter 3

chapter 3 - Chapter 3: Processing Accounting information...

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Unformatted text preview: Chapter 3: Processing Accounting information The Accounting Cycle During period Analyze transactions Record journal entries Post amounts to the general ledger At end of period Adjust revenues and expenses for unrecorded items Prepare financial statements Close revenue, expense, and dividend accounts and update the retained earnings account Repeat for next period Transaction Analysis Processing of accounting information, or transaction analysis Bookkeeping Analyze each transaction in terms of its impact on the accounting equation Eventually will look at Dr and CR rules, the general journal, and the general ledger. The accounting process TRANSACTIONS (Events) occur. Transaction data is recorded on SOURCE DOCUMENTS. Each transaction is analyzed in terms of impact on the accounting equation and ENTERED in the JOURNAL. (Journal entry) The information in the journal entries is POSTED to the LEDGER. (Ledger account) [A listing of the ledger account balances is a TRIAL BALANCE] Problem 3-3: Transaction Analysis and Financial Statements Expert Consulting Services Inc. was organized on March 1, 2008, by two former college roommates. The corporation will provide computer consulting services to small businesses. The following transactions occurred during the first month of operations: March 2: Received contributions of $20,000 from each of the two principal owners of the new business in exchange for shares of stock. March 7: Signed a two-year promissory note at the bank and received cash of $15,000. Interest along with the $15,000, will be repaid at the end of the two years. March 12: Purchased $700 in miscellaneous supplies on account. The company has 30 days to pay for the supplies. March 19: Billed a client $4,000 for services rendered by Expert in helping install a new computer system. The client is to pay 25% of the bill upon its receipt and the remaining balance within 30 days. March 20: Paid $1,300 bill from the local newspaper for advertising for the month of March. March 22: Received 25% of the amount billed the client on March 19. March 26: Received cash of $2,800 for services provided in assisting a client in selecting software for its computer. March 29: Purchased a computer system for $8,000 in cash. March 30: Paid $3,300 of salaries and wages for March. March 31: Received and paid $1,400 in gas, electric, and water bills. Required : 1. Prepare a table to summarize the preceding transactions as they affect the accounting equation. Use the format in Exhibit 3-1. Identify each transaction with the date. 2. Prepare an income statement for the month ended March 31, 2008. 3. Prepare a classified balance sheet at March 31, 2008....
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chapter 3 - Chapter 3: Processing Accounting information...

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