acct 3001 ch 3 - CH 3 THE ACCOUNTING INFORMATION SYSTEM 1....

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Unformatted text preview: 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? Basic Terminology (see Textbook for definitions) Event Transaction Account Real Account Nominal Account Ledger Journal Posting Trial Balance Adjusting Entries Financial Statements Closing Entries 2. 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 CH 3 THE ACCOUNTING INFORMATION SYSTEM 3. Financial Statements and Ownership Structure Income Statement: Revenues Expenses Net Income (Loss) Retained Earnings Statement (for corporations)*: Beginning Retained Earnings + Net Income-Dividends Ending Retained Earnings *May be included within a Statement of Stockholders Equity which shows the changes in all Equity accounts Balance Sheet: Assets = Liabilities and Stockholders Equity** Proprietorship or Partnership Corporation Capital Account Drawings Account Common Stock Additional Paid-in Capital (APIC) Retained Earnings ** Stockholders Equity accounts depend upon the ownership structure of the entity 4. 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 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)? CH 3 THE ACCOUNTING INFORMATION SYSTEM 1. A supplier of a companys 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. A new advertising agency is hired. 7. The accountant determines the federal income taxes owed based on the income earned. CH 3 THE ACCOUNTING INFORMATION SYSTEM Real vs. Nominal Accounts A real or permanent account is a balance sheet account. A nominal or temporary account is an income statement account. Some common accounts you will see and where they belong follow:...
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acct 3001 ch 3 - CH 3 THE ACCOUNTING INFORMATION SYSTEM 1....

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