Additional steps such as posting and then preparing a trial balance help

Additional steps such as posting and then preparing a

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. Additional steps such as posting and then preparing a trial balance help summarize and classify the effects of transactions and events. Ultimately, the accounting process provides information in useful reports or financial statements to decision makers.Source DocumentsSource documentsidentify and describe transactions and events entering the accounting pro-cess. They are the sources of accounting information and can be in either hard copy or elec-tronic form. Examples are sales tickets, checks, purchase orders, bills from suppliers, employee
Chapter 2 Analyzing and Recording Transactions 51earnings records, and bank statements. To illustrate, when an item is purchased on credit, the seller usually prepares at least two copies of a sales invoice. One copy is given to the buyer. Another copy, often sent electronically, results in an entry in the seller’s information system to record the sale. Sellers use invoices for recording sales and for control; buyers use them for recording purchases and for monitoring purchasing activity. Many cash registers record infor-mation for each sale on a tape or electronic file locked inside the register. This record can be used as a source document for recording sales in the accounting records. Source documents, especially if obtained from outside the organization, provide objective and reliable evidence about transactions and events and their amounts.Point:To ensure that all sales are rung up on the register, most sellers require customers to have their receipts to exchange or return purchased items.Asset Accounts Assets are resources owned or controlled by a company, and those resources have expected future benefits. Most accounting systems include (at a minimum) sepa-rate accounts for the assets described here.A Cashaccount reflects a company’s cash balance. All increases and decreases in cash are recorded in the Cash account. It includes money and any medium of exchange that a bank ac-cepts for deposit (coins, checks, money orders, and checking account balances).Accounts receivableare held by a seller and refer to promises of payment from customers to sellers. These transactions are often called credit salesor sales on account (oron credit). Accounts receivable are increased by credit sales and are decreased by customer payments. A company needs a separate record for each customer, but for now, we use the simpler practice of recording all increases and decreases in receivables in a single account called Accounts Receivable.A note receivable,or promissory note, is a written promise of another entity to pay a definite sum of money on a specified future date to the holder of the note. A company holding a promis-sory note signed by another entity has an asset that is recorded in a Note (or Notes) Receivable account.

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