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Accounting 201 - Chapter 03
 

Accounting 201 - Chapter 03

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Accounting 201 - Chapter 03

Accounting 201 - Chapter 03

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    Accounting 201 - Chapter 03 Accounting 201 - Chapter 03 Presentation Transcript

    • 3-1
    • 3-2 THE ACCOUNTING INFORMATION SYSTEM Accounting, Fifth Edition 3
    • 3-3 After studying this chapter, you should be able to: 1. Analyze the effect of business transactions on the basic accounting equation. 2. Explain what an account is and how it helps in the recording process. 3. Define debits and credits and explain how they are used to record business transactions. 4. Identify the basic steps in the recording process. 5. Explain what a journal is and how it helps in the recording process. 6. Explain what a ledger is and how it helps in the recording process. 7. Explain what posting is and how it helps in the recording process. 8. Explain the purposes of a trial balance. 9. Classify cash activities as operating, investing, or financing. Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives
    • 3-4 Preview of Chapter 3 Accounting Fifth Edition Kimmel Weygandt Kieso
    • 3-5 Accounting Information System System of ► collecting and ► processing transaction data and ► communicating financial information to decision makers. Most businesses use computerized accounting (EDP) systems. The Accounting Information SystemThe Accounting Information SystemThe Accounting Information SystemThe Accounting Information System LO 1 Analyze the effect of business transactions on the basic accounting equation.
    • 3-6 Transactions are economic events that require recording in the financial statements.  Not all activities represent transactions.  Assets, liabilities, or stockholders’ equity items change as a result of some economic event.  Dual effect on the accounting equation. Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions LO 1 Analyze the effect of business transactions on the basic accounting equation.
    • 3-7 Question: Are the following events recorded in the accounting records? Event Purchase computer. Criterion Is the financial position (assets, liabilities, or stockholders’ equity) of the company changed? Pay rent. Record/ Don’t Record Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions Discuss guided trip options with potential customer. Illustration 3-1 LO 1 Analyze the effect of business transactions on the basic accounting equation.
    • 3-8 AssetsAssetsAssetsAssets LiabilitiesLiabilitiesLiabilitiesLiabilities Stockholders’Stockholders’ EquityEquity Stockholders’Stockholders’ EquityEquity= + Analyzing Transactions LO 1 Analyze the effect of business transactions on the basic accounting equation. Basic Accounting Equation Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions The process of identifying the specific effects of economic events on the accounting equation.
    • 3-9 LO 1 Analyze the effect of business transactions on the basic accounting equation. Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions Illustration 3-2 Expanded accounting equation Analyzing Transactions
    • 3-10 Event (1). On October 1, cash of $10,000 is invested in Sierra Corporation by investors in exchange for $10,000 of common stock. Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions 1. +10,000 +10,000 LO 1 Analyze the effect of business transactions on the basic accounting equation.
    • 3-11 Event (2). On October 1, Sierra borrowed $5,000 from Castle Bank by signing a 3-month, 12%, $5,000 note payable. Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions 1. +10,000 +10,000 2. +5,000 +5,000 LO 1 Analyze the effect of business transactions on the basic accounting equation.
    • 3-12 Event (3). On October 2, Sierra purchased equipment by paying $5,000 cash to Superior Equipment Sales Co. Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 LO 1 Analyze the effect of business transactions on the basic accounting equation.
    • 3-13 Event (4). On October 2, Sierra received a $1,200 cash advance from R. Knox, a client. Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions 4. +1,200 +1,200 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 LO 1 Analyze the effect of business transactions on the basic accounting equation.
    • 3-14 Event (5). On October 3, Sierra received $10,000 in cash from Copa Company for guide services performed. Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions 4. +1,200 +1,200 5. +10,000 +10,000 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 LO 1 Analyze the effect of business transactions on the basic accounting equation.
    • 3-15 Event (6). On October 3, Sierra Corporation paid its office rent for the month of October in cash, $900. Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions 4. +1,200 +1,200 5. +10,000 +10,000 6. -900 -900 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 LO 1 Analyze the effect of business transactions on the basic accounting equation.
    • 3-16 Event (7). On October 4, Sierra paid $600 for a one-year insurance policy that will expire next year on September 30. Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions 4. +1,200 +1,200 5. +10,000 +10,000 6. -900 -900 7. -600 +600 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 LO 1 Analyze the effect of business transactions on the basic accounting equation.
    • 3-17 Event (8). On October 5, Sierra purchased an estimated three months of supplies on account from Aero Supply for $2,500. Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions 4. +1,200 +1,200 5. +10,000 +10,000 6. -900 -900 7. -600 +600 8. +2,500 +2,500 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 LO 1 Analyze the effect of business transactions on the basic accounting equation.
    • 3-18 Event (9). On October 9, Sierra hired four new employees to begin work on October 15. Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions 4. +1,200 +1,200 5. +10,000 +10,000 6. -900 -900 7. -600 +600 8. +2,500 +2,500 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 LO 1 Analyze the effect of business transactions on the basic accounting equation. An accounting transaction has not occurred.
    • 3-19 Event (10). On October 20, Sierra paid a $500 dividend. Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions 4. +1,200 +1,200 5. +10,000 +10,000 6. -900 -900 7. -600 +600 8. +2,500 +2,500 10. -500 -500 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000 LO 1 Analyze the effect of business transactions on the basic accounting equation.
    • 3-20 Event (11). Employees have worked two weeks, earning $4,000 in salaries, which were paid on October 26. Accounting TransactionsAccounting TransactionsAccounting TransactionsAccounting Transactions 4. +1,200 +1,200 5. +10,000 +10,000 6. -900 -900 7. -600 +600 8. +2,500 +2,500 10. -500 -500 11. -4,000 -4,000 3. -5,000 +5,000 1. +10,000 +10,000 2. +5,000 +5,000
    • 3-21
    • 3-22 Account Name Debit / Dr. Credit / Cr.  Record of increases and decreases in a specific asset, liability, equity, revenue, or expense item.  Debit = “Left”  Credit = “Right” AccountAccount An Account canAn Account can be illustrated in abe illustrated in a T-Account form.T-Account form. LO 2 Explain what an account is and how it helps in the recording process. The AccountThe AccountThe AccountThe Account
    • 3-23 Double-entryDouble-entry system  Each transaction must affect two or more accounts to keep the basic accounting equation in balance.  Recording done by debiting at least one account and crediting another.  DEBITS must equalmust equal CREDITS. LO 3 Define debits and credits and explain they are used to record business transactions. Debit and Credit Procedures The AccountThe AccountThe AccountThe Account
    • 3-24 Account Name Debit / Dr. Credit / Cr. If Debits are greater thangreater than Credits, the account will have a debit balance. $10,000 Transaction #2$3,000 $15,000$15,000 8,000Transaction #3 Balance Transaction #1 Debit and Credit ProceduresDebit and Credit ProceduresDebit and Credit ProceduresDebit and Credit Procedures LO 3 Define debits and credits and explain they are used to record business transactions.
    • 3-25 Account Name Debit / Dr. Credit / Cr. $10,000 Transaction #2$3,000 Balance Transaction #1 $1,000$1,000 8,000 Transaction #3 Debit and Credit ProceduresDebit and Credit ProceduresDebit and Credit ProceduresDebit and Credit Procedures If Credits are greater than Debits, the account will have a credit balance. LO 3 Define debits and credits and explain they are used to record business transactions.
    • 3-26  Assets - Debits should exceed credits.  Liabilities – Credits should exceed debits. Procedures for Assets and LiabilitiesProcedures for Assets and LiabilitiesProcedures for Assets and LiabilitiesProcedures for Assets and Liabilities Chapter 3-23 AssetsAssets Debit / Dr. Credit / Cr. Normal BalanceNormal Balance Chapter 3-24 LiabilitiesLiabilities Debit / Dr. Credit / Cr. Normal BalanceNormal Balance LO 3 Define debits and credits and explain they are used to record business transactions.
    • 3-27  Investments by stockholders and revenues increase stockholders’ equity (credit).  Dividends and expenses decrease stockholder’s equity (debit). Procedures for Stockholders’ EquityProcedures for Stockholders’ EquityProcedures for Stockholders’ EquityProcedures for Stockholders’ Equity Chapter 3-25 Debit / Dr. Credit / Cr. Normal BalanceNormal Balance Common StockCommon Stock Chapter 3-23 DividendsDividends Debit / Dr. Credit / Cr. Normal BalanceNormal Balance Chapter 3-25 Debit / Dr. Credit / Cr. Normal BalanceNormal Balance StockholdersStockholders’’ EquityEquity Chapter 3-25 Debit / Dr. Credit / Cr. Normal BalanceNormal Balance Retained EarningsRetained Earnings LO 3 Define debits and credits and explain they are used to record business transactions.
    • 3-28  The purpose of earning revenues is to benefit the stockholders.  The effect of debits and credits on revenue accounts is the same as their effect on stockholders’ equity.  Expenses have the opposite effect: expenses decrease stockholders’ equity.Chapter 3-27 Debit / Dr. Credit / Cr. Normal BalanceNormal Balance ExpenseExpense Chapter 3-26 Debit / Dr. Credit / Cr. Normal BalanceNormal Balance RevenueRevenue Procedures for Revenue and ExpenseProcedures for Revenue and ExpenseProcedures for Revenue and ExpenseProcedures for Revenue and Expense LO 3 Define debits and credits and explain they are used to record business transactions.
    • 3-29 Stockholders’ Equity RelationshipsStockholders’ Equity RelationshipsStockholders’ Equity RelationshipsStockholders’ Equity Relationships Illustration 3-15 LO 3 Define debits and credits and explain they are used to record business transactions.
    • 3-30 Chapter 3-23 AssetsAssets Debit / Dr. Credit / Cr. Normal BalanceNormal Balance Chapter 3-27 Debit / Dr. Credit / Cr. Normal BalanceNormal Balance ExpenseExpense Chapter 3-24 LiabilitiesLiabilities Debit / Dr. Credit / Cr. Normal BalanceNormal Balance Chapter 3-25 Debit / Dr. Credit / Cr. Normal BalanceNormal Balance StockholdersStockholders’’ EquityEquity Chapter 3-26 Debit / Dr. Credit / Cr. Normal BalanceNormal Balance RevenueRevenue Normal Balance Credit Normal Balance Credit Normal Balance Debit Normal Balance Debit Summary of Debit/Credit RulesSummary of Debit/Credit RulesSummary of Debit/Credit RulesSummary of Debit/Credit Rules LO 3 Define debits and credits and explain they are used to record business transactions.
    • 3-31 Balance Sheet Income Statement = + =-Asset Liability Equity Revenue Expense Debit Credit Summary of Debit/Credit RulesSummary of Debit/Credit RulesSummary of Debit/Credit RulesSummary of Debit/Credit Rules LO 3 Define debits and credits and explain they are used to record business transactions.
    • 3-32 Summary of Debit/Credit RulesSummary of Debit/Credit RulesSummary of Debit/Credit RulesSummary of Debit/Credit Rules Relationship among the assets, liabilities and stockholders’ equity of a business: The equation must be in balance after every transaction. For every Debit there must be a Credit. Illustration 3-16 Assets Liabilities= Stockholders’ Equity Basic Equation Expanded Basic Equation + LO 3 Define debits and credits and explain they are used to record business transactions.
    • 3-33 Debits: a. increase both assets and liabilities. b. decrease both assets and liabilities. c. increase assets and decrease liabilities. d. decrease assets and increase liabilities. Review Question Summary of Debit/Credit RulesSummary of Debit/Credit RulesSummary of Debit/Credit RulesSummary of Debit/Credit Rules LO 3 Define debits and credits and explain they are used to record business transactions.
    • 3-34 Accounts that normally have debit balances are: a. assets, expenses, and revenues. b. assets, expenses, and equity. c. assets, liabilities, and dividends. d. assets, dividends, and expenses. Review Question Summary of Debit/Credit RulesSummary of Debit/Credit RulesSummary of Debit/Credit RulesSummary of Debit/Credit Rules LO 3 Define debits and credits and explain they are used to record business transactions.
    • 3-35
    • 3-36 Source documents, such as a sales slip, a check, a bill, or a cash register tape, provide evidence of the transaction. Steps in the Recording ProcessSteps in the Recording ProcessSteps in the Recording ProcessSteps in the Recording Process LO 4 Identify the basic steps in the recording process. Illustration 3-17 Analyze each transaction Enter transaction in a journal Transfer journal information to ledger accounts
    • 3-37  Book of original entry.  Transactions recorded in chronological order.  Contributions to the recording process: 1. Discloses the complete effects of a transaction. 2. Provides a chronological record of transactions. 3. Helps to prevent or locate errors because the debit and credit amounts can be easily compared. LO 5 Explain what a journal is and how it helps in the recording process. Steps in the Recording ProcessSteps in the Recording ProcessSteps in the Recording ProcessSteps in the Recording Process The Journal
    • 3-38 Journalizing - Entering transaction data in the journal. Illustration: Presented below is information related to Sierra Corporation. Sierra issued common stock in exchange for $10,000 cash. Oct. 1 Sierra borrowed $5,000 by signing a note.1 Sierra purchased equipment for $5,000.2 Instructions - Journalize these transactions. The JournalThe JournalThe JournalThe Journal LO 5 Explain what a journal is and how it helps in the recording process.
    • 3-39 Account Title Ref. Debit Credit Oct. 1 Date JournalizingJournalizingJournalizingJournalizing General Journal LO 5 Explain what a journal is and how it helps in the recording process. Cash Common stock 10,000 10,000 Sierra issued common stock in exchange for $10,000 cash. Oct. 1
    • 3-40 Account Title Ref. Debit Credit Oct. 1 Date JournalizingJournalizingJournalizingJournalizing General Journal LO 5 Explain what a journal is and how it helps in the recording process. Sierra borrowed $5,000 by signing a note.Oct. 1 Cash Notes payable 5,000 5,000
    • 3-41 Account Title Ref. Debit Credit Oct. 2 Date JournalizingJournalizingJournalizingJournalizing General Journal LO 5 Explain what a journal is and how it helps in the recording process. Sierra purchased equipment for $5,000.Oct. 2 Equipment Cash 5,000 5,000
    • 3-42
    • 3-43 The Ledger is comprised of the entire group of accounts maintained by a company. LO 6 Explain what a ledger is and how it helps in the recording process. Illustration 3-19 Steps in the Recording ProcessSteps in the Recording ProcessSteps in the Recording ProcessSteps in the Recording Process
    • 3-44 Steps in the Recording ProcessSteps in the Recording ProcessSteps in the Recording ProcessSteps in the Recording Process LO 6 Explain what a ledger is and how it helps in the recording process. Chart of Accounts – listing of accounts used by a company to record transactions. Illustration 3-20
    • 3-45 Cash Acct. No. 101 Explanation Ref. Debit Credit BalanceDate General Ledger Date Account Title Ref. Debit Credit Oct. 1 Cash 10,000 Common stock 10,000 General Journal Oct. 1 Stock issued J1 10,000 10,000 101 J1 Steps in the Recording ProcessSteps in the Recording ProcessSteps in the Recording ProcessSteps in the Recording Process LO 7 Posting – the process of transferring journal entry amounts to ledger accounts.
    • 3-46 Posting: a. normally occurs before journalizing. b. transfers ledger transaction data to the journal. c. is an optional step in the recording process. d. transfers journal entries to ledger accounts. Review Question LO 7 Explain what posting is and how it helps in the recording process. Steps in the Recording ProcessSteps in the Recording ProcessSteps in the Recording ProcessSteps in the Recording Process
    • 3-47
    • 3-48 The Recording Process IllustratedThe Recording Process IllustratedThe Recording Process IllustratedThe Recording Process Illustrated Follow these steps: 1. Determine what type of account is involved. 2. Determine what items increased or decreased and by how much. 3. Translate the increases and decreases into debits and credits. LO 7 Explain what posting is and how it helps in the recording process. Illustration 3-21
    • 3-49 The Recording Process IllustratedThe Recording Process IllustratedThe Recording Process IllustratedThe Recording Process Illustrated LO 7 Explain what posting is and how it helps in the recording process. Follow these steps: 1. Determine what type of account is involved. 2. Determine what items increased or decreased and by how much. 3. Translate the increases and decreases into debits and credits. Illustration 3-22
    • 3-50 The Recording Process IllustratedThe Recording Process IllustratedThe Recording Process IllustratedThe Recording Process Illustrated LO 7 Explain what posting is and how it helps in the recording process. Follow these steps: 1. Determine what type of account is involved. 2. Determine what items increased or decreased and by how much. 3. Translate the increases and decreases into debits and credits. Illustration 3-23
    • 3-51 LO 7 Explain what posting is and how it helps in the recording process. Additional Transactions TheThe RecordingRecording ProcessProcess IllustratedIllustrated TheThe RecordingRecording ProcessProcess IllustratedIllustrated Illustration 3-24
    • 3-52 LO 7 Explain what posting is and how it helps in the recording process. Additional Transactions TheThe RecordingRecording ProcessProcess IllustratedIllustrated TheThe RecordingRecording ProcessProcess IllustratedIllustrated Illustration 3-25
    • 3-53 LO 7 Explain what posting is and how it helps in the recording process. Additional Transactions TheThe RecordingRecording ProcessProcess IllustratedIllustrated TheThe RecordingRecording ProcessProcess IllustratedIllustrated Illustration 3-26
    • 3-54 Additional Transactions TheThe RecordingRecording ProcessProcess IllustratedIllustrated TheThe RecordingRecording ProcessProcess IllustratedIllustrated Illustration 3-27
    • 3-55 LO 7 Explain what posting is and how it helps in the recording process. Additional Transactions TheThe RecordingRecording ProcessProcess IllustratedIllustrated TheThe RecordingRecording ProcessProcess IllustratedIllustrated Illustration 3-28
    • 3-56 LO 7 Explain what posting is and how it helps in the recording process. The Recording Process IllustratedThe Recording Process IllustratedThe Recording Process IllustratedThe Recording Process Illustrated Additional Transactions Illustration 3-29
    • 3-57 LO 7 Explain what posting is and how it helps in the recording process. Additional Transactions TheThe RecordingRecording ProcessProcess IllustratedIllustrated TheThe RecordingRecording ProcessProcess IllustratedIllustrated Illustration 3-30
    • 3-58 LO 7 Additional Transactions TheThe RecordingRecording ProcessProcess IllustratedIllustrated TheThe RecordingRecording ProcessProcess IllustratedIllustrated Illustration 3-31
    • 3-59 Summary Illustration of JournalizingSummary Illustration of JournalizingSummary Illustration of JournalizingSummary Illustration of Journalizing Illustration 3-32 LO 7
    • 3-60 Summary Illustration of JournalizingSummary Illustration of JournalizingSummary Illustration of JournalizingSummary Illustration of Journalizing Illustration 3-32 LO 7
    • 3-61 SummarySummary IllustrationIllustration of Postingof Posting SummarySummary IllustrationIllustration of Postingof Posting Illustration 3-33 LO 7 Explain what posting is and how it helps in the recording process.
    • 3-62 Selected transactions from the journal of Faital Inc. during its first month of operations are presented below. Post these transactions to T-accounts. LO 7 Explain what posting is and how it helps in the recording process.
    • 3-63 Trial Balance  A list of accounts and their balances at a given time.  Accounts are listed in the order in which they appear in the ledger. The Trial BalanceThe Trial BalanceThe Trial BalanceThe Trial Balance LO 8 Explain the purposes of a trial balance.  Purpose is to prove that debits equal credits.  May also uncover errors in journalizing and posting.  Useful in the preparation of financial statements.
    • 3-64 The Trial BalanceThe Trial BalanceThe Trial BalanceThe Trial Balance Illustration 3-34 Equal LO 8
    • 3-65 The trial balance may balance even when 1. a transaction is not journalized, 2. a correct journal entry is not posted, 3. a journal entry is posted twice, 4. incorrect accounts are used in journalizing or posting, or 5. offsetting errors are made in recording the amount of a transaction. The Trial BalanceThe Trial BalanceThe Trial BalanceThe Trial Balance LO 8 Explain the purposes of a trial balance. Limitations of a Trial Balance Ethics Note An error is the result of an unintentional mistake. It is neither ethical nor unethical. An irregularity is an intentional misstatement, which is viewed as unethical.
    • 3-66 A trial balance will not balance if: a. a correct journal entry is posted twice. b. the purchase of supplies on account is debited to Supplies and credited to Cash. c. a $100 cash dividends is debited to the Dividends account for $1,000 and credited to Cash for $100. d. a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45. Review Question The Trial BalanceThe Trial BalanceThe Trial BalanceThe Trial Balance LO 8 Explain the purposes of a trial balance.
    • 3-67 The Cash account and the related cash transactions indicate why cash changed during October. To make this information useful for analysis it is summarized in a statement of cash flows. The statement of cash flows classifies each transaction as an operating activity, an investing activity, or a financing activity. Sierra Corporation’s:  Operating activities involve providing guide services.  Investing activities include the purchase or sale of long-lived assets used in operating the business, or the purchase or sale of investment securities.  Financing activities are borrowing money, issuing shares of stock, and paying dividends. LO 9 Classify cash activities as operating, investing, or financing.
    • 3-68  Transaction analysis is the same under IFRS and GAAP however different standards sometimes impact how transactions are recorded.  European companies rely less on historical cost and more on fair value than U.S. companies. The double-entry system is the basis of accounting systems worldwide.  Both the IASB and FASB go beyond the basic definitions provided in this textbook for the key elements of financial statements, that is, assets, liabilities, equity, revenues, and expenses. Key Points LO 10 Compare the procedures for the recording process under GAAP and IFRS.
    • 3-69  A trial balance under IFRS follows the same format as shown in the textbook.  As shown in the textbook, dollars signs are typically used only in the trial balance and the financial statements. The same practice is followed under IFRS, using the currency of the country in which the reporting company is headquartered. Key Points LO 10 Compare the procedures for the recording process under GAAP and IFRS.
    • 3-70  In deciding whether the United States should adopt IFRS, some of the issues the SEC said should be considered are: ► Whether IFRS is sufficiently developed and consistent in application. ► Whether the IASB is sufficiently independent. ► Whether IFRS is established for the benefit of investors. Key Points LO 10 Compare the procedures for the recording process under GAAP and IFRS.
    • 3-71  Some of the issues the SEC said should be considered are: ► The issues involved in educating investors about IFRS. ► The impact of a switch to IFRS on U.S. laws and regulations. ► The impact on companies including changes to their accounting systems, contractual arrangements, corporate governance, and litigation. ► The issues involved in educating accountants, so they can prepare statements under IFRS. Key Points LO 10 Compare the procedures for the recording process under GAAP and IFRS.
    • 3-72 The basic recording process shown in this textbook is followed by companies across the globe. It is unlikely to change in the future. The definitional structure of assets, liabilities, equity, revenues, and expenses may change over time as the IASB and FASB evaluate their overall conceptual framework for establishing accounting standards. Looking to the Future LO 10 Compare the procedures for the recording process under GAAP and IFRS.
    • 3-73 Which statement is correct regarding IFRS? a) IFRS reverses the rules of debits and credits, that is, debits are on the right and credits are on the left. b) IFRS uses the same process for recording transactions as GAAP. c) The chart of accounts under IFRS is different because revenues follow assets. d) None of the above statements are correct. IFRS Practice LO 10 Compare the procedures for the recording process under GAAP and IFRS.
    • 3-74 A trial balance: a) is the same under IFRS and GAAP. b) proves that transactions are recorded correctly. c) proves that all transactions have been recorded. d) will not balance if a correct journal entry is posted twice. IFRS Practice LO 10 Compare the procedures for the recording process under GAAP and IFRS.
    • 3-75 One difference between IFRS and GAAP is that: a) GAAP uses accrual-accounting concepts and IFRS uses primarily the cash basis of accounting. b) IFRS uses a different posting process than GAAP. c) IFRS uses more fair value measurements than GAAP. d) the limitations of a trial balance are different between IFRS and GAAP. IFRS Practice LO 10 Compare the procedures for the recording process under GAAP and IFRS.
    • 3-76 CopyrightCopyrightCopyrightCopyright “Copyright © 2013 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.”