Chapter 02

Chapter 02 - ANALYZING AND RECORDING TRANSACTIONS Chapter 2...

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Unformatted text preview: ANALYZING AND RECORDING TRANSACTIONS Chapter 2 McGraw-Hill/Irwin Slide 2 McGraw-Hill/Irwin Slide 2 ACCOUNTING PROCESS The accounting process identifies transactions and events, analyzes and records their effects, and summarizes and presents information in reports and financial statements. McGraw-Hill/Irwin Slide 3 McGraw-Hill/Irwin Slide 3 TRANSACTIONS AND EVENTS External transactions are exchanges of value between two entities, which yield changes in the accounting equation. Example: purchase an equipment Internal transactions are exchanges within an entity; they can also affect the accounting equation. Example: use of supplies Events refer to happenings that affect an entity's accounting equation and can be reliably measured. Example: fires that destroy assets McGraw-Hill/Irwin Slide 4 McGraw-Hill/Irwin Slide 4 Sales Tickets Bank Statements Purchase Orders Checks SOURCE DOCUMENTS Bills from Suppliers Employee Earnings Records McGraw-Hill/Irwin Slide 5 McGraw-Hill/Irwin Slide 5 JOURNALIZING & POSTING TRANSACTIONS Step 1: Analyze transactions and source documents. Liabilities Liabilities Equity Equity Assets Assets = + Step 2: Apply double- entry accounting (Left side) (Right side) Debit Credit T- Account ACCOUNT NAME: ACCOUNT No. Date Description PR Debit Credit Balance Step 4: Post entry to ledger Step 3: Record journal entry McGraw-Hill/Irwin Slide 6 McGraw-Hill/Irwin Slide 6 An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item. An account is a record of increases and decreases in a specific asset, liability, equity, revenue, or expense item. THE ACCOUNT AND ITS ANALYSIS The general ledger is a record containing all accounts used by the company. The general ledger is a record containing all accounts used by the company. McGraw-Hill/Irwin Slide 7 McGraw-Hill/Irwin Slide 7 LEDGER AND CHART OF ACCOUNTS The ledger is a collection of all accounts for an The ledger is a collection of all accounts for an information system. A companys size and diversity information system. A companys size and diversity of operations affect the number of accounts needed. of operations affect the number of accounts needed....
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This note was uploaded on 03/12/2012 for the course BUSI 1002 taught by Professor Liu during the Winter '10 term at HKU.

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Chapter 02 - ANALYZING AND RECORDING TRANSACTIONS Chapter 2...

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