chapter 02 the accounting information system mcgraw-hill/irwin copyright © 2011 by the mcgraw-hill...
TRANSCRIPT
Chapter 02
The Accounting Information System
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Roles of Financial Accounting
o Measure business activities of the company.
o Communicate those measurements to external parties for decision-making purposes.
o Measure business activities of the company.
o Communicate those measurements to external parties for decision-making purposes.
2-2
Part A
Measuring Business Activities
2-3
LO1 Identify the Basic Steps in Measuring External Transactions
o Most business enterprises use a computerized accounting system due to the sheer volume of data they must process.
o Computerized data processing is fast, accurate, and affordable.
o Knowledge of manual accounting information system will provide an essential understanding of the basic model that underlies the computerized programs.
o Most business enterprises use a computerized accounting system due to the sheer volume of data they must process.
o Computerized data processing is fast, accurate, and affordable.
o Knowledge of manual accounting information system will provide an essential understanding of the basic model that underlies the computerized programs.
2-4
Classification of Business Activities
EXTERNALTRANSACTIONS
EXTERNALTRANSACTIONS
TRANSACTIONSTRANSACTIONS
With a separateeconomic entity
With a separateeconomic entity
With in the company
INTERNALTRANSACTIONS
INTERNALTRANSACTIONS
Do not include a separateeconomic entity
Do not include a separateeconomic entity
2-5
LO2 Analyze the Impact of External Transactions on the Accounting Equation
= +
(resources) (claims to resources)
Assets Stockholders' EquityLiabilities
Each transaction will have a dual effect. If an economic event increases one side of the equation, then it also increases the other side of the equation by the same amount.
Each transaction will have a dual effect. If an economic event increases one side of the equation, then it also increases the other side of the equation by the same amount.
2-6
Effects of transactions on the Expanded Accounting Equation
BasicAssets = Liabilities + Accounting
Equation
Common Stock + Retained Earnings
Expanded
Revenues − Expenses – Dividends
Net Income
Stockholders' Equity
2-7
Summary of All Ten External Transactions of Eagle Golf Academy
= +Financing Activities:
(1) Cash $25,000 Common Stock $25,000
(2) Cash $10,000 Notes Payable $10,000
Subtotal $35,000 = $10,000 + $25,000
Investing Activities:
(3) Equipment $24,000
Cash -$24,000Subtotal $35,000 = $10,000 + $25,000
Operating Activities:(4) Prepaid Rent $6,000
Cash -$6,000(5) Supplies $2,300 Accounts Payable $2,300(6) Cash $3,600 Service Revenue $3,600(7) Accounts Receivable $2,500 Service Revenue $2,500(8) Cash $600 Unearned Revenue $600(9) Cash -$2,800 Salaries Expense -$2,800
Subtotal $41,200 = $12,900 + $28,300
Financing Activity:
(10) Cash -$200 Dividends -$200Total $41,000 = $12,900 + $28,100
Stockholders’ EquityLiabilitiesAssets
2-8
PART B
Debits and Credits
2-9
LO3 Assess Whether the Impact of External Transactions Results in a Debit or Credit to an Account Balance
Debit and Credit Effects on Accounts in the Accounting Equation
Debit and Credit Effects on Accounts in the Accounting Equation
= +
Debit Credit Debit Credit Debit Credit
Assets Liabilities Stockholders' Equity
2-10
Debit and Credit Effects on Accounts in the Expanded Accounting Equation
= +
Debit Credit Debit Credit Debit Credit
+
Debit Credit Debit Credit
- -
Debit Credit Debit Credit Debit Credit
Assets Liabilities Stockholders' Equity
Common Stock Retained Earnings
Expenses DividendsRevenues
Net Income
2-11
LO4 Record Transactions Using Debits and Credits
A journal provides a chronological record of all transactions affecting a firm.
A journal provides a chronological record of all transactions affecting a firm.
January 1 Debit Credit
Cash (+A ) ..................................................... 25,000Common Stock (+SE ) ........................... 25,000(Issue common stock for cash)
January 1 Debit Credit
Cash (+A ) ..................................................... 10,000Notes Payable (+L ) ............................... 10,000(Borrow by signing long-term note)
2-12
LO5 Post Transactions to T-accounts in the General Ledger
o The process of transferring the debit and credit information from the journal to individual accounts in the general ledger is called posting.
o A T-account is a simplified form of a general ledger account with space at the top for the account title and two sides for recording debits and credits.
o The process of transferring the debit and credit information from the journal to individual accounts in the general ledger is called posting.
o A T-account is a simplified form of a general ledger account with space at the top for the account title and two sides for recording debits and credits.
ACCOUNT TITLE
DEBIT CREDIT
2-13
LO6 Prepare a Trial Balance
o A trial balance is a list of all accounts and their balances at a particular date, showing that total debits equal total credits.
o Another purpose of the trial balance is to assist us in preparing adjusting entries (for internal transactions).
o It is not a published financial statement to be used by external parties, there is no required order for listing accounts in the trial balance.
o The trial balance is used for internal purposes only and provides a check on the equality of the debits and credits.
o A trial balance is a list of all accounts and their balances at a particular date, showing that total debits equal total credits.
o Another purpose of the trial balance is to assist us in preparing adjusting entries (for internal transactions).
o It is not a published financial statement to be used by external parties, there is no required order for listing accounts in the trial balance.
o The trial balance is used for internal purposes only and provides a check on the equality of the debits and credits.
2-14
End of chapter 02
2-15