Title: Financial Accounting: Tools for Business Decision Making, 3rd Ed'
1Financial AccountingTools for Business Decision
Making, 3rd Ed.
Kimmel, Weygandt, Kieso
2Chapter 3
3Chapter 3The AccountingInformation System
- After studying Chapter 3, you should be able to
- Analyze the effect of business transactions on
the basic accounting equation. - Explain what an account is and how it helps in
the recording process. - Define debits and credits and explain how they
are used to record business transactions. - Identify the basic steps in the recording process.
4Chapter 3The AccountingInformation System
- After studying Chapter 3, you should be able to
- Explain what a journal is and how it helps in the
recording process. - Explain what a ledger is and how it helps in the
recording process. - Explain what posting is and how it helps in the
recording process. - Explain the purposes of a trial balance.
5The Accounting Information System
- The system of
- collecting and processing transaction data and
- communicating financial information to decision
makers.
6 Accounting Transactions...
7Accounting Analysis...
analyze the effect of business transactions on
the basic accounting equation
8Account...
an individual accounting record of increases and
decreases in a specific Asset, Liability, or
Stockholders Equity item.
9Chart of Accounts...
- Is a list of a companys accounts.
- ASSETS
- Cash
- Accounts Receivable
- Advertising Supplies
- Prepaid Insurance
- Office Equipment
- Accumulated Depreciation -
- Office Equipment
10Account
Three parts 1) 2) 3)
11The T Account
12Tabular Summary
Account Form
Balancing an Account
13Illustration 3-6
Illustration 3-8
Illustration 3-10
NEW ART
14Illustration 3-11
Illustration 3-13
NEW ART
15Whichever side you increase is the normal balance!
16The Recording Process
- Analyze each transaction
- Enter information in a journal
- Transfer the information to the appropriate
accounts
17The Journal...
is an accounting record where the transactions
are recorded in chronological order.
18Journals
Types of Journals
- Cash receipts
- Cash disbursements
- Sales
- Purchases
- General
19Journals
Journals aid the recording process by
- Disclosing in one place the complete effect of a
transaction - Providing a chronological record of transactions
- Helping prevent or locate errors because debit
and credit amounts can be easily compared.
20Date
Debit Credit
1 Cash
5,000
Notes Payable
5,000 (Issued
3-month, 12 note payable for cash)
2 Office Equipment
5,000
Cash
5,000 (Purchased
office equipment for cash)
21The General Ledger
- the entire group of accounts maintained by a
company - contains all the asset, liability, and
stockholders equity accounts
22The General Ledger
23The Ledger
The entries from the journal are posted to the
ledger,usually in summary form, except for the
general journal.
24Posting
Transferring information from the journals to the
general ledger accounts
25Posting Entries
Balance
debit
credit
debit
credit
ref
Account COMMON STOCK
Acct 3010
Date
Balance
debit
credit
debit
credit
ref
26Posting Entries
Balance
debit
credit
debit
credit
ref
gj 1
Oct 1
10,000
10,000
Account COMMON STOCK
Acct 3010
Date
Balance
debit
credit
debit
credit
ref
Oct 1
gj 1
10,000
10,000
27Posting Entries
Balance
debit
credit
debit
credit
ref
gj 1
Oct 1
10,000
10,000
Account COMMON STOCK
Acct 3010
Date
Balance
debit
credit
debit
credit
ref
Oct 1
gj 1
10,000
10,000
28Trial Balance
A list of all the accounts and their balances at
a given time.
It serves to prove the mathematical
equality of _______ and _______ after
posting. It aids in the preparation of
financial statements.
29Sierra Corporation Trial Balance October 31, 2004
Debit Credit
Cash
15,200 Advertising
Supplies
2,500 Prepaid Insurance
600 Office Equipment
5,000 Notes Payable
5,000 Accounts
Payable
2,500 Unearned
Service Revenue
1,200 Common Stock
10,000 Dividends
500 Service Revenue
10,000 Salaries Expense
4,000 Rent
Expense
900
28,700 28,700