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Overview of the Accounting Process.pdf - COURSE MATERIALS...

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Page1of13COURSE MATERIALS (CM) 6A_Final Interim AssessmentINTEGRATED FUNDAMENTAL OF ACCOUNTINGAccounting Process Including the Adjusting ProcessLECTURE NOTES1.0DEFINITION OF ACCOUNTINGAccounting is the art of recording, classifying and summarizing in a significantmanner and in terms of money, transactions and events which are in part at leastof financial characterand interpreting the results thereof. (AICPA committee onaccounting terminology)2.0STEPSIN THE ACCOUNTING PROCESS (CYCLE)1.Analyze business documents2.Journalize transactions3.Post to ledger accounts4.Prepare a trial balance5.Prepare adjusting entries6.Prepare financial statements (using a work sheet or from the adjustedindividual accounts)7.Close the nominal accounts8.Prepare a post-closing trial balance (optional)9.Prepare reversing entries (optional)The accounting process can be described as a set of procedures used inidentifying, recording, classifying and interpreting information related to thetransactions and other events of a business enterprise.3.0RECORDING PHASE3.1Analyze business documents3.1.1Ascertain what transactions and events should be recognized.3.1.2Recognition is the process of incorporating in the balance sheet or incomestatement an item that meets the definition of an element and satisfies thecriteria for recognition.3.1.3Generally an item that meets the definition of an element should berecognized if:a.It is probable that any future economic benefit associated with the item willflow to or from the entity; andb.The item has a cost or value that can be measured with reliability.3.2Record transactions
Page2of133.2.1Originally record debits and credits in chronological order in a journal.Journal entries provide a systematicmethod of summarizing a business event’seffect on the basic accounting equation.3.2.2In journalizing transactions:Usedoubleentryaccountingsystem.Basicaccountingequation:Assets=Liabilities + EquityDebits are entries on the left side of accounts and credits are entries to rightside of accounts.Normal balances of the financial statements: Assets and ExpensesDebitLiabilities, Equity and IncomeCredit3.2.3Types of journalsSpecial journalrecords frequently recurring transactions (e.g. sales journal,purchases journal, cash receipts journal, and cash payments journal)General journalrecords all transactions not recorded in special journals.3.3Post transactions3.3.1Transfer debits and credits to ledger accounts which summarize changesin financial statements elements.3.3.2Posting is the process of transferring information from journal entries toledger accounts.3.3.2An account is used to summarize the effects of transactions on eachelement of the expanded accounting equation. A chart of accounts summarizesexisting accounts used by a particular business.

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Term
Fall
Professor
vsavdsabc
Tags
Balance Sheet, Generally Accepted Accounting Principles, Double entry bookkeeping system, C Debit Cash

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