The document provides an overview of the key concepts and steps covered in Chapter 3 of Intermediate Accounting. It discusses the accounting information system and its objectives. The key steps in the accounting cycle are identified as journalizing transactions, posting to ledger accounts, preparing an initial trial balance, adjusting entries, and final financial statements. Basic accounting terminology is defined, including accounts, debits/credits, the accounting equation, and the different types of accounts. Examples are provided to illustrate double-entry accounting and the posting process.
Bab 3 - The Accounting Information Systemmsahuleka
The document discusses key aspects of an accounting information system and the accounting cycle, including basic terminology, double-entry rules, journalizing and posting transactions, preparing adjusting entries, and financial statements. It explains the steps in the accounting cycle such as recording transactions, preparing a trial balance, making adjustments, preparing an adjusted trial balance and financial statements, and closing entries.
The document provides an overview of the key learning objectives and content covered in Chapter 3 of Intermediate Accounting (IFRS 2nd Edition) by Kieso, Weygandt, and Warfield. The chapter introduces fundamental accounting concepts including the accounting equation, double-entry system, accounting cycle, basic terminology, adjusting entries, and preparation of financial statements. It also discusses how the accounting information system collects and processes transaction data to disseminate financial information to stakeholders.
This document discusses key accounting concepts including the accounting equation, financial statements, and financial ratios. It explains that the accounting equation is assets = liabilities + owner's equity, and that the four basic financial statements are the income statement, statement of owner's equity, classified balance sheet, and statement of cash flows. It also introduces the concept of using financial ratios to analyze trends in a business's assets, revenues, expenses, and efficiency.
Test bank for principles of accounting 12th edition by needlesAmelia1827
Test bank for principles of accounting 12th edition by needles
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This document discusses inventory classification and costing methods. It begins by explaining how companies classify inventory into raw materials, work in process, and finished goods. The document then discusses how companies determine inventory quantities by taking physical counts and considering goods in transit. It also explains different inventory cost flow methods like FIFO, LIFO, and average costing and their effects on financial statements. Finally, it discusses how inventory errors can affect income statements and balance sheets in both the current and subsequent periods.
The document provides information about adjusting entries for Micro Computer Services for August 2017. It states that accrued revenues of $500 were earned but not recorded for services performed. It also states that accrued expenses of $300 were incurred for unpaid utilities. The adjusting entries would debit Accounts Receivable and credit Service Revenue for $500 to record accrued revenues. For accrued expenses, the adjusting entries would debit Utilities Expense and credit Accounts Payable for $300 to record accrued expenses.
Wiley financial accounting 9e by Weygandt Kimmel KiesoAbrar Malik
This document provides a chart of accounts that classifies common accounts used in accounting. It lists account titles and provides information on their classification in financial statements and their normal balance. The chart includes accounts for assets, liabilities, equity, revenues, and expenses. It provides classifications for current assets, plant assets, intangible assets, current and long-term liabilities, and categories of equity and temporary accounts. The document also indicates that the chart represents commonly used accounts and does not include a comprehensive list of all accounts. It notes the chart is for a company that generates both service and sales revenue and uses perpetual inventory.
Bab 3 - The Accounting Information Systemmsahuleka
The document discusses key aspects of an accounting information system and the accounting cycle, including basic terminology, double-entry rules, journalizing and posting transactions, preparing adjusting entries, and financial statements. It explains the steps in the accounting cycle such as recording transactions, preparing a trial balance, making adjustments, preparing an adjusted trial balance and financial statements, and closing entries.
The document provides an overview of the key learning objectives and content covered in Chapter 3 of Intermediate Accounting (IFRS 2nd Edition) by Kieso, Weygandt, and Warfield. The chapter introduces fundamental accounting concepts including the accounting equation, double-entry system, accounting cycle, basic terminology, adjusting entries, and preparation of financial statements. It also discusses how the accounting information system collects and processes transaction data to disseminate financial information to stakeholders.
This document discusses key accounting concepts including the accounting equation, financial statements, and financial ratios. It explains that the accounting equation is assets = liabilities + owner's equity, and that the four basic financial statements are the income statement, statement of owner's equity, classified balance sheet, and statement of cash flows. It also introduces the concept of using financial ratios to analyze trends in a business's assets, revenues, expenses, and efficiency.
Test bank for principles of accounting 12th edition by needlesAmelia1827
Test bank for principles of accounting 12th edition by needles
Full clear download( no error formatting) at:
https://goo.gl/N6T4GK
principles of accounting needles 12th edition pdf
principles of accounting 12th edition needles answers
principles of accounting 12th edition needles powers crosson pdf
principles of accounting needles pdf
principles of accounting 12th edition answer key pdf
principles of accounting 12th edition pdf
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belverd needles
This document discusses inventory classification and costing methods. It begins by explaining how companies classify inventory into raw materials, work in process, and finished goods. The document then discusses how companies determine inventory quantities by taking physical counts and considering goods in transit. It also explains different inventory cost flow methods like FIFO, LIFO, and average costing and their effects on financial statements. Finally, it discusses how inventory errors can affect income statements and balance sheets in both the current and subsequent periods.
The document provides information about adjusting entries for Micro Computer Services for August 2017. It states that accrued revenues of $500 were earned but not recorded for services performed. It also states that accrued expenses of $300 were incurred for unpaid utilities. The adjusting entries would debit Accounts Receivable and credit Service Revenue for $500 to record accrued revenues. For accrued expenses, the adjusting entries would debit Utilities Expense and credit Accounts Payable for $300 to record accrued expenses.
Wiley financial accounting 9e by Weygandt Kimmel KiesoAbrar Malik
This document provides a chart of accounts that classifies common accounts used in accounting. It lists account titles and provides information on their classification in financial statements and their normal balance. The chart includes accounts for assets, liabilities, equity, revenues, and expenses. It provides classifications for current assets, plant assets, intangible assets, current and long-term liabilities, and categories of equity and temporary accounts. The document also indicates that the chart represents commonly used accounts and does not include a comprehensive list of all accounts. It notes the chart is for a company that generates both service and sales revenue and uses perpetual inventory.
This document discusses key concepts related to analyzing financial statements including horizontal and vertical analysis, ratio analysis, and sustainable income. It defines horizontal analysis as evaluating financial statement data over time to determine increases and decreases. Vertical analysis expresses each financial statement item as a percentage of a base amount. Ratio analysis is used to analyze a company's performance using ratios that measure liquidity, profitability, and solvency. Sustainable income differs from actual net income by excluding unusual revenues, expenses, gains, and losses to determine a company's most likely future income level.
The document provides an overview of accounting information systems. It discusses the basic concepts of an AIS, including that an AIS collects and processes transaction data and communicates financial information. It also describes the nature and purpose of subsidiary ledgers, which are used to track individual account balances like accounts receivable. Additionally, the document explains how to record transactions in special journals, including sales, purchases, cash receipts and payments journals, in order to organize similar transactions and reduce general journal entries. It compares AIS under GAAP and IFRS.
1) The document discusses accounting for merchandising operations under a perpetual inventory system. It describes how purchases, sales, returns and allowances are recorded.
2) Purchases are recorded by debiting inventory and crediting accounts payable. Sales are recorded by crediting sales revenue and debiting cost of goods sold and inventory.
3) Returns and allowances are contra accounts that are credited to offset original debit entries for purchases or sales. This summary highlights the key accounting entries for a merchandising business.
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Solutions manual for fundamental accounting principles volume 1 canadian 15th...Miller612
Here are the journal entries to record the transactions:
Jan. 1 Accounts Receivable 1,000
Service Revenue 1,000
To record services provided on account
Jan. 5 Cash 400
Accounts Receivable 400
To record collection of account receivable
Jan. 10 Accounts Payable 920
Cash 920
To record payment of accounts payable
Jan. 15 Service Revenue 900
Accounts Receivable 900
To record services provided on account
Jan. 20 Cash 1,800
Accounts Receivable 1,800
To record collection of accounts receivable
Jan. 25 Cash 2,500
Accounts Payable 2,500
To record payment of accounts payable
Jan. 30 Accounts
Here are the steps to solve this payroll problem:
(a) Gross earnings: $40,000
FICA taxes (7.65% of $40,000): 0.0765 * $40,000 = $3,060
Federal income tax withheld: $9,000
State income tax withheld: $1,000
Net pay = Gross earnings - FICA taxes - Federal taxes - State taxes
= $40,000 - $3,060 - $9,000 - $1,000 = $26,940
(b) Salaries and Wages Expense 40,000
FICA Taxes Payable 3,060
Federal Income Taxes Payable 9,000
This document provides an overview of an ACCT101 review course taught by Dr. Abdullah Alakkas. It covers key accounting topics like the accounting equation, accounting cycle, financial statements, and accounting standards. It also includes examples of basic journal entries and trial balances for transactions of a sample company called KPMG Accounting Firm. These examples track investments, purchases, expenses, revenues and payments over the course of one month.
The document describes the accounting recording process, including how accounts, debits, credits, journals, ledgers, and trial balances are used. It explains that journals are used to record transactions chronologically, while ledgers contain accounts for assets, liabilities, equity, revenues, and expenses. Transactions are posted from journals to ledgers to update account balances. A trial balance is prepared to check that total debits equal total credits. While useful, a trial balance does not guarantee accurate records as errors can still exist.
Adjusting entries are needed at the end of each accounting period to ensure revenues and expenses are recorded in the correct period. There are two categories of adjusting entries: prepaids, where cash is paid before an expense is recorded, and accruals, where an expense is recorded before cash is paid. Examples of adjusting entries include recording prepaid rent and insurance expenses as they are used up each period, and accruing expenses like salaries that have been incurred but not yet paid. Adjusting entries ensure the financial statements accurately reflect the assets, liabilities, revenues and expenses for the period.
This document provides an overview of adjusting entries in 3 parts:
1. It introduces adjusting entries and explains they are needed to follow accrual accounting principles by ensuring revenues and expenses are recorded in the correct periods.
2. It identifies the major types of adjusting entries as deferrals (prepaid expenses and unearned revenues) and accruals (accrued revenues and accrued expenses).
3. It explains how to prepare adjusting entries for specific types of deferrals, including prepaid expenses like supplies, insurance, and depreciation, as well as unearned revenues. Examples are provided for each.
The document discusses the steps in preparing a worksheet. It begins by explaining how to prepare a trial balance on the worksheet by transferring account balances from the ledger. The second step is to enter adjusting entries in the adjustments columns. The third step is to complete the adjusted trial balance columns by totaling debits and credits. The fourth step extends adjusted account balances to the appropriate financial statement columns. The final step is to compute net income or loss by totaling the columns and determining the difference between revenues and expenses.
Bab 1 - Financial Accounting and Accounting Standardsmsahuleka
The document discusses key concepts in financial accounting and accounting standards including:
1) It identifies the major financial statements and other means used for financial reporting such as notes, letters, and reports.
2) It explains how accounting assists in efficient allocation of resources by providing useful information to investors and creditors for decision making.
3) It describes some challenges facing accounting such as measuring non-financial items and providing timely information.
4) It outlines the objectives of financial reporting and need for accounting standards to be developed.
5) It identifies the major bodies that set accounting standards including the FASB, SEC, AICPA, and GASB and their roles in the standard-setting process.
The document discusses the statement of cash flows, including its usefulness, format, and how to prepare it using the indirect method. It explains that the statement of cash flows provides information about a company's cash receipts and payments during a period and is separated into operating, investing, and financing activities. It also discusses how to classify transactions and adjust net income to reconcile it to net cash provided by operating activities. Key steps include adding back non-cash expenses, and analyzing changes in current assets and liabilities.
The document discusses budgeting principles and the components of the master budget. It states that the master budget is a set of interrelated budgets that constitutes a plan of action for a specified time period and contains operating budgets and financial budgets. The operating budgets are used as the basis for preparing the budgeted income statement, while the financial budgets focus on cash needs to fund operations and capital expenditures. It also discusses preparing budgets for sales, production, direct materials, direct labor, manufacturing overhead, selling and administrative expenses, and a budgeted income statement.
1. The document provides an overview of chapter 1 of the textbook "Financial Accounting" which covers topics such as what accounting is, who uses accounting data, ethics in accounting, accounting standards, and the basic accounting equation.
2. It defines accounting as identifying, recording, and communicating the economic events of an organization to interested users. Accounting data is used by internal and external users such as managers, investors, creditors, and more.
3. Ethics, accounting standards set by bodies like FASB and IASB, and measurement principles like historical cost are also introduced as important foundations of accounting.
CHAPTER 3 Measuring Business Income: The Adjusting ProcessGene Carboni
This document discusses accrual versus cash basis accounting and the adjusting process. It provides examples of adjusting entries for prepaid expenses, supplies, depreciation, accrued expenses, accrued revenues, and unearned revenues. The key points are:
- Accrual basis accounting records revenues when earned and expenses when incurred, regardless of cash receipt/payment. Cash basis records when cash is paid/received.
- Adjusting entries bring accounts to correct balances at financial statement dates by recognizing revenues/expenses in appropriate periods.
- An adjusted trial balance serves as the basis for the financial statements: income statement, statement of owner's equity, and balance sheet.
Generally Accepted Accounting Principles (GAAP) are the standards and procedures companies use to compile their financial statements. GAAP include authoritative standards set by policy boards as well as commonly accepted practices. Companies must follow GAAP when reporting financial data to provide consistency for investors. Major components of GAAP include basic principles like the entity principle and matching principle, assumptions like going concern and stable dollar, and standards like objectivity, consistency, and conservatism.
Here are the key steps to solving this problem:
1. Calculate 10% of accounts receivable to estimate uncollectible accounts:
- 10% of $30,000 is 0.1 * $30,000 = $3,000
2. Add the existing balance in the allowance account:
- $2,000 existing balance
3. The total estimated uncollectible accounts is $3,000 + $2,000 = $5,000
Therefore, the adjusting entry is:
Bad Debt Expense 5,000
Allowance for Doubtful Accounts 5,000
This document provides an overview of exercises, problems, cases, and internet assignments from Chapter 2 of an accounting textbook. It lists 23 exercises that cover topics such as preparing basic financial statements, accounting principles, effects of transactions, and evaluating financial statements. For each exercise, it provides the learning objectives, estimated time to complete, and difficulty level. It also provides brief descriptions and estimated times for 10 problems and 5 cases designed to reinforce chapter concepts.
The Accounting Information System
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
Describe the basic accounting information system.
Record and summarize basic transactions.
Identify and prepare adjusting entries.
Prepare financial statements from the adjusted trial balance and prepare closing entries.
Prepare financial statements for a merchandising company.
The document describes the accounting cycle and basic accounting concepts. It begins by outlining the learning objectives of describing the basic accounting information system, recording transactions, preparing adjusting entries, and preparing financial statements. It then provides details on the accounting information system, journal entries, T-accounts, debits and credits, the accounting equation, the trial balance, and adjusting entries. It includes examples of adjusting entries for supplies, insurance, depreciation, and unearned revenue. The overall purpose is to explain the fundamentals of the accounting process.
This document discusses key concepts related to analyzing financial statements including horizontal and vertical analysis, ratio analysis, and sustainable income. It defines horizontal analysis as evaluating financial statement data over time to determine increases and decreases. Vertical analysis expresses each financial statement item as a percentage of a base amount. Ratio analysis is used to analyze a company's performance using ratios that measure liquidity, profitability, and solvency. Sustainable income differs from actual net income by excluding unusual revenues, expenses, gains, and losses to determine a company's most likely future income level.
The document provides an overview of accounting information systems. It discusses the basic concepts of an AIS, including that an AIS collects and processes transaction data and communicates financial information. It also describes the nature and purpose of subsidiary ledgers, which are used to track individual account balances like accounts receivable. Additionally, the document explains how to record transactions in special journals, including sales, purchases, cash receipts and payments journals, in order to organize similar transactions and reduce general journal entries. It compares AIS under GAAP and IFRS.
1) The document discusses accounting for merchandising operations under a perpetual inventory system. It describes how purchases, sales, returns and allowances are recorded.
2) Purchases are recorded by debiting inventory and crediting accounts payable. Sales are recorded by crediting sales revenue and debiting cost of goods sold and inventory.
3) Returns and allowances are contra accounts that are credited to offset original debit entries for purchases or sales. This summary highlights the key accounting entries for a merchandising business.
Accounting Principle 6th Edition Weygandt Test BankGaybestsarae
Full download : https://alibabadownload.com/product/accounting-principle-6th-edition-weygandt-test-bank/ Accounting Principle 6th Edition Weygandt Test Bank , Accounting Principle,Weygandt,6th Edition,Test Bank
Solutions manual for fundamental accounting principles volume 1 canadian 15th...Miller612
Here are the journal entries to record the transactions:
Jan. 1 Accounts Receivable 1,000
Service Revenue 1,000
To record services provided on account
Jan. 5 Cash 400
Accounts Receivable 400
To record collection of account receivable
Jan. 10 Accounts Payable 920
Cash 920
To record payment of accounts payable
Jan. 15 Service Revenue 900
Accounts Receivable 900
To record services provided on account
Jan. 20 Cash 1,800
Accounts Receivable 1,800
To record collection of accounts receivable
Jan. 25 Cash 2,500
Accounts Payable 2,500
To record payment of accounts payable
Jan. 30 Accounts
Here are the steps to solve this payroll problem:
(a) Gross earnings: $40,000
FICA taxes (7.65% of $40,000): 0.0765 * $40,000 = $3,060
Federal income tax withheld: $9,000
State income tax withheld: $1,000
Net pay = Gross earnings - FICA taxes - Federal taxes - State taxes
= $40,000 - $3,060 - $9,000 - $1,000 = $26,940
(b) Salaries and Wages Expense 40,000
FICA Taxes Payable 3,060
Federal Income Taxes Payable 9,000
This document provides an overview of an ACCT101 review course taught by Dr. Abdullah Alakkas. It covers key accounting topics like the accounting equation, accounting cycle, financial statements, and accounting standards. It also includes examples of basic journal entries and trial balances for transactions of a sample company called KPMG Accounting Firm. These examples track investments, purchases, expenses, revenues and payments over the course of one month.
The document describes the accounting recording process, including how accounts, debits, credits, journals, ledgers, and trial balances are used. It explains that journals are used to record transactions chronologically, while ledgers contain accounts for assets, liabilities, equity, revenues, and expenses. Transactions are posted from journals to ledgers to update account balances. A trial balance is prepared to check that total debits equal total credits. While useful, a trial balance does not guarantee accurate records as errors can still exist.
Adjusting entries are needed at the end of each accounting period to ensure revenues and expenses are recorded in the correct period. There are two categories of adjusting entries: prepaids, where cash is paid before an expense is recorded, and accruals, where an expense is recorded before cash is paid. Examples of adjusting entries include recording prepaid rent and insurance expenses as they are used up each period, and accruing expenses like salaries that have been incurred but not yet paid. Adjusting entries ensure the financial statements accurately reflect the assets, liabilities, revenues and expenses for the period.
This document provides an overview of adjusting entries in 3 parts:
1. It introduces adjusting entries and explains they are needed to follow accrual accounting principles by ensuring revenues and expenses are recorded in the correct periods.
2. It identifies the major types of adjusting entries as deferrals (prepaid expenses and unearned revenues) and accruals (accrued revenues and accrued expenses).
3. It explains how to prepare adjusting entries for specific types of deferrals, including prepaid expenses like supplies, insurance, and depreciation, as well as unearned revenues. Examples are provided for each.
The document discusses the steps in preparing a worksheet. It begins by explaining how to prepare a trial balance on the worksheet by transferring account balances from the ledger. The second step is to enter adjusting entries in the adjustments columns. The third step is to complete the adjusted trial balance columns by totaling debits and credits. The fourth step extends adjusted account balances to the appropriate financial statement columns. The final step is to compute net income or loss by totaling the columns and determining the difference between revenues and expenses.
Bab 1 - Financial Accounting and Accounting Standardsmsahuleka
The document discusses key concepts in financial accounting and accounting standards including:
1) It identifies the major financial statements and other means used for financial reporting such as notes, letters, and reports.
2) It explains how accounting assists in efficient allocation of resources by providing useful information to investors and creditors for decision making.
3) It describes some challenges facing accounting such as measuring non-financial items and providing timely information.
4) It outlines the objectives of financial reporting and need for accounting standards to be developed.
5) It identifies the major bodies that set accounting standards including the FASB, SEC, AICPA, and GASB and their roles in the standard-setting process.
The document discusses the statement of cash flows, including its usefulness, format, and how to prepare it using the indirect method. It explains that the statement of cash flows provides information about a company's cash receipts and payments during a period and is separated into operating, investing, and financing activities. It also discusses how to classify transactions and adjust net income to reconcile it to net cash provided by operating activities. Key steps include adding back non-cash expenses, and analyzing changes in current assets and liabilities.
The document discusses budgeting principles and the components of the master budget. It states that the master budget is a set of interrelated budgets that constitutes a plan of action for a specified time period and contains operating budgets and financial budgets. The operating budgets are used as the basis for preparing the budgeted income statement, while the financial budgets focus on cash needs to fund operations and capital expenditures. It also discusses preparing budgets for sales, production, direct materials, direct labor, manufacturing overhead, selling and administrative expenses, and a budgeted income statement.
1. The document provides an overview of chapter 1 of the textbook "Financial Accounting" which covers topics such as what accounting is, who uses accounting data, ethics in accounting, accounting standards, and the basic accounting equation.
2. It defines accounting as identifying, recording, and communicating the economic events of an organization to interested users. Accounting data is used by internal and external users such as managers, investors, creditors, and more.
3. Ethics, accounting standards set by bodies like FASB and IASB, and measurement principles like historical cost are also introduced as important foundations of accounting.
CHAPTER 3 Measuring Business Income: The Adjusting ProcessGene Carboni
This document discusses accrual versus cash basis accounting and the adjusting process. It provides examples of adjusting entries for prepaid expenses, supplies, depreciation, accrued expenses, accrued revenues, and unearned revenues. The key points are:
- Accrual basis accounting records revenues when earned and expenses when incurred, regardless of cash receipt/payment. Cash basis records when cash is paid/received.
- Adjusting entries bring accounts to correct balances at financial statement dates by recognizing revenues/expenses in appropriate periods.
- An adjusted trial balance serves as the basis for the financial statements: income statement, statement of owner's equity, and balance sheet.
Generally Accepted Accounting Principles (GAAP) are the standards and procedures companies use to compile their financial statements. GAAP include authoritative standards set by policy boards as well as commonly accepted practices. Companies must follow GAAP when reporting financial data to provide consistency for investors. Major components of GAAP include basic principles like the entity principle and matching principle, assumptions like going concern and stable dollar, and standards like objectivity, consistency, and conservatism.
Here are the key steps to solving this problem:
1. Calculate 10% of accounts receivable to estimate uncollectible accounts:
- 10% of $30,000 is 0.1 * $30,000 = $3,000
2. Add the existing balance in the allowance account:
- $2,000 existing balance
3. The total estimated uncollectible accounts is $3,000 + $2,000 = $5,000
Therefore, the adjusting entry is:
Bad Debt Expense 5,000
Allowance for Doubtful Accounts 5,000
This document provides an overview of exercises, problems, cases, and internet assignments from Chapter 2 of an accounting textbook. It lists 23 exercises that cover topics such as preparing basic financial statements, accounting principles, effects of transactions, and evaluating financial statements. For each exercise, it provides the learning objectives, estimated time to complete, and difficulty level. It also provides brief descriptions and estimated times for 10 problems and 5 cases designed to reinforce chapter concepts.
The Accounting Information System
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
Describe the basic accounting information system.
Record and summarize basic transactions.
Identify and prepare adjusting entries.
Prepare financial statements from the adjusted trial balance and prepare closing entries.
Prepare financial statements for a merchandising company.
The document describes the accounting cycle and basic accounting concepts. It begins by outlining the learning objectives of describing the basic accounting information system, recording transactions, preparing adjusting entries, and preparing financial statements. It then provides details on the accounting information system, journal entries, T-accounts, debits and credits, the accounting equation, the trial balance, and adjusting entries. It includes examples of adjusting entries for supplies, insurance, depreciation, and unearned revenue. The overall purpose is to explain the fundamentals of the accounting process.
The document discusses the accounting information system and key concepts in the accounting cycle. It provides learning objectives for understanding basic accounting terminology, explaining double-entry rules, identifying steps in the accounting cycle, and recording transactions in journals and ledgers. Key terms are defined, such as assets, liabilities, equity, revenues, expenses, and debits and credits. Examples demonstrate double-entry accounting, the accounting equation, and the steps of the accounting cycle including journalizing, posting, preparing a trial balance, and making adjusting entries.
This document provides an overview of the accounting cycle and accounting information system. It begins with learning objectives that cover basic accounting terminology, double-entry rules, steps in the accounting cycle including journalizing, posting, trial balances and financial statements. The accounting cycle is then explained through examples of transactions being recorded in journals and posted to ledger accounts. The purpose of the accounting information system is also summarized as collecting, processing and disseminating financial information to interested parties like management.
Chapter 2, Fundamentals of Accounting I (2).pptxKalkaye
This document provides an overview of the accounting cycle for service businesses. It discusses key concepts like accounts, debits and credits, journals, ledgers, and the steps in the recording process. The recording process involves analyzing transactions, recording them in a journal, and then posting the journal entries to the appropriate accounts in the general ledger. Adjusting entries, preparing an adjusted trial balance, and closing entries are also part of the full accounting cycle.
The document discusses key concepts in the accounting information system including:
1) The basic steps in the recording process such as analyzing transactions, journalizing, posting to ledger accounts, and preparing a trial balance.
2) The use of debits and credits to record transactions and their effect on different types of accounts.
3) The purpose and use of accounts, journals, ledgers, and the trial balance in the recording process.
Here are the steps to analyze and post a journal entry:
1. Analyze the journal entry to determine the accounts involved and whether each account increased or decreased.
2. Determine if each account is an asset, liability, equity, revenue or expense account based on the general ledger chart of accounts.
3. Translate increases in asset and expense accounts and decreases in liability, equity and revenue accounts into debits, and increases in liability, equity and revenue accounts and decreases in asset and expense accounts into credits.
4. Record the debits and credits in the appropriate general ledger accounts.
Posting
Question
LO 6
The document discusses adjusting entries in accounting. It explains that adjusting entries are necessary under the accrual basis of accounting to properly recognize revenues and expenses in the correct periods, as revenues should be recorded when earned and expenses recorded when incurred rather than when cash is paid or received. The major types of adjusting entries are for deferrals, such as prepaid expenses and unearned revenues, and for accruals. The document provides examples of adjusting entry journal entries for prepaid expenses and unearned revenues.
The document provides an overview of adjusting entries and the adjusted trial balance process. It begins by explaining key concepts like the time period assumption and accrual basis of accounting. It then discusses the reasons for adjusting entries, which are to ensure revenues are recorded in the earned period and expenses are recorded in the incurred period. The major types of adjusting entries are identified as prepaid expenses, unearned revenues, accrued revenues, and accrued expenses. The document provides examples of adjusting entries for deferrals, which include prepaid expenses and unearned revenues. It shows entries to adjust accounts like advertising supplies, prepaid insurance, and accumulated depreciation. The overall purpose is to explain the adjusting entry process that is needed to prepare accurate
Week 3Week 3E3-9 and E3-13Total Points 50E3-9 [20 pts]E3-13 .docxmelbruce90096
Week 3Week 3:E3-9 and E3-13Total Points: 50E3-9: [20 pts]E3-13: [30 pts]General Journal(a)Cash(b)GALAXY INC.DateAccount TitlesDebitCreditAug. 1Aug. 1Trial BalanceMay 4Accounts payable70010August 31, 2012Cash70031DebitCredit7Bal.Cash…………………………….Accounts receivable…….8Accounts ReceivableEquipment…………………..Aug. 25Aug. 31Notes payable……………..9Bal.Common Stock……………Service revenue…………..17EquipmentAug. 1222Bal.29Notes PayableAug. 12Bal.Common StockAug. 1Bal.Service RevenueAug. 1025Bal.
study objectives
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.
chapter
THE ACCOUNTING
INFORMATION SYSTEM
3
100
● Scan Study Objectives
● Read Feature Story
● Scan Preview
● Read Text and Answer
p. 110 p. 116 p. 119 p. 128
● Work Using the Decision Toolkit
● Review Summary of Study Objectives
● Work Comprehensive p. 133
● Answer Self-Test Questions
● Complete Assignments
● Go to WileyPLU S for practice and tutorials
● Read A Look at I FR S p. 159
● the navigator
Do it!
Do it!
✓
c03TheAccountingInformationSystem.qxd 9/2/10 1:38 PM Page 100
101
How organized are you financially? Take a short quiz.
Answer yes or no to each question:
• Does your wallet contain so many cash machine
receipts that you’ve been declared a walking fire
hazard?
• Is your wallet such a mess that it is often faster to
fish for money in the crack of your car
seat than to dig around in your wallet?
• Was Steve Nash playing high school
basketball the last time you balanced
your bank account?
• Have you ever been tempted to burn down your
house so you don’t have to try to find all of the re-
ceipts and records that you need to fill out your tax
returns?
If you think it is hard to keep track of the many
transactions that make up your life, imagine what it is
like for a major corporation like Fidelity Investments.
Fidelity is one of the largest mutual fund manage-
ment firms in the world. If you had your life savings
invested at Fidelity Investments, you might be just
slightly displeased if, when you called to find out
your balance, the representative said, “You know, I
kind of remember someone with a name like yours
sending us some money—now what did we do with
that?”
To ensure the accuracy of your balance and the
security of your funds, Fidelity Investments, like all
other companies large and small, relies on a sophisti-
cated.
This document provides information about a financial accounting course at Eelo University in Borama, Somaliland. It introduces the lecturer, Professor Abdi Ali Hassan, who holds a B.Sc. and MBA in Strategic Management from the University of Nairobi. It also provides Professor Abdi's contact information.
The document summarizes key concepts from Chapter 3 of an accounting textbook. It discusses the general ledger and how it contains all individual ledger accounts. It explains how transactions are posted from the general journal to ledger accounts, including the steps in the posting process. It also covers how a trial balance is prepared by listing account balances to ensure total debits equal total credits. Finding and correcting errors in the trial balance is also addressed.
ACCOUNTING PRINCIPLES 1. Which of the following is not a core financial statement?
a. The Income Statement
b. Statement of Cash Flows
c. The Trial Balance
d. The Balance Sheet
2. The income statement, which presents the results of operations, can be prepared in many forms including:
a. Single Step Income Statement
b. Condensed Income Statement
c. Common Sized Income Statement
d. All of the above
3. Which of the following account types increase by debits in double-entry accounting?
a. Assets, Expenses, Losses
b. Assets, Revenue, Gains
c. Expenses, Liabilities, Losses
d. Gains, Expenses, Liabilities
4. Which of the following is true?
a. Accounts receivable are found in the current asset section of a balance sheet.
b. Accounts receivable increase by credits.
c. Accounts receivable are generated when a customer makes payments.
d. Accounts receivable become more valuable over time.
5. A company that uses the cash basis of accounting will:
a. Record revenue when it is collected.
b. Record revenue when it is earned.
c. Record revenue at the same time as accounts receivable.
d. Record bad debt expense on the income statement.
6. What are the main sections on a balance sheet?
a. Assets, liabilities, income
b. Assets, liabilities, equity
c. Assets, liabilities, expenses
d. Assets, gains, revenue
7. How are a company’s financial statements used?
a. For internal analysis
b. For external negotiation
c. For compliance
d. All of the above
8. Which of the following scenarios increases accounts payable?
a. A customer fails to pay an invoice.
b. A supplier delivers raw materials on credit.
c. Office supplies are purchased with cash.
d. None of the above
9. Which of the following must a certified public accountant (CPA) have in-depth knowledge of to pass the CPA licensing exam? (Check all that apply.)
a. Accounting software packages
b. Auditing
c. Derivatives
d. International banking laws
10. What is the result of the following transaction for Company A? Company A’s customer is unable to pay for a previous credit sale in accordance with Company A’s 90-day payment terms. The customer makes a promissory note to Company A that extends payment over a 24-month term including 5% interest.
a. No result because the customer didn’t pay.
b. Accounts receivable increases because of the interest.
c. A note receivable is recorded in non-current assets.
d. Company A records the loan as a liability.
11. When are liabilities recorded under the accrual basis of accounting?
a. When incurred
b. When paid
c. At the end of the fiscal year
d. When bank accounts are reconciled
12. Which is true about time in accounting?
a. Current liabilities are debts payable within 2 years.
b. Balance sheets reflect a company’s financial position at a certain point in time.
c. The time value of money is a finance concept, not relevant in accounting.
d. Accounts receivable are more easily collected as time passes.
13. When a company purchases property, plant, and equipment, how is it reflected on the
Sure, let's go through the main concepts of financial statements, their advantages and disadvantages, and provide examples and relevant ratio calculations.
Main Financial Statements
1. Income Statement
2. Balance Sheet
3. Cash Flow Statement
4. Statement of Changes in Equity
1. Income Statement
Concept:
• Shows the company's revenues, expenses, and profits or losses over a specific period.
• Key components include revenues, cost of goods sold (COGS), gross profit, operating expenses, operating income, interest, taxes, and net income.
Advantages:
• Provides a clear picture of profitability.
• Helps in assessing operational efficiency.
• Useful for trend analysis over different periods.
Disadvantages:
• Can be manipulated through accounting practices.
• Does not provide a complete financial health picture (e.g., cash flow).
Example:
Sure, let's go through the main concepts of financial statements, their advantages and disadvantages, and provide examples and relevant ratio calculations.
Main Financial Statements
1. Income Statement
2. Balance Sheet
3. Cash Flow Statement
4. Statement of Changes in Equity
1. Income Statement
Concept:
• Shows the company's revenues, expenses, and profits or losses over a specific period.
• Key components include revenues, cost of goods sold (COGS), gross profit, operating expenses, operating income, interest, taxes, and net income.
Advantages:
• Provides a clear picture of profitability.
• Helps in assessing operational efficiency.
• Useful for trend analysis over different periods.
Disadvantages:
• Can be manipulated through accounting practices.
• Does not provide a complete financial health picture (e.g., cash flow).
Example:
The document describes the basic accounting process of recording transactions. It explains that each transaction affects at least two accounts, with equal debits and credits, to keep the accounting equation in balance. A journal is used to initially record transactions in chronological order before they are posted to individual accounts in the general ledger. Ledger accounts track increases and decreases to assets, liabilities, equity, revenues and expenses, with standard rules for whether balances are normally debit or credit. A trial balance is prepared to check that total debits equal total credits after all posting, but may still balance with certain types of errors present.
The document discusses adjusting entries in accounting. It explains key concepts like the time period assumption, accrual basis accounting, and reasons for adjusting entries. There are several types of adjusting entries, including entries for deferrals like prepaid expenses and unearned revenues, as well as accruals for revenues and expenses. An adjusted trial balance is prepared after all adjusting entries, which proves the equality of debits and credits and provides the basis for financial statements.
Independent Study - College of Wooster Research (2023-2024) FDI, Culture, Glo...AntoniaOwensDetwiler
"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
OJP data from firms like Vicinity Jobs have emerged as a complement to traditional sources of labour demand data, such as the Job Vacancy and Wages Survey (JVWS). Ibrahim Abuallail, PhD Candidate, University of Ottawa, presented research relating to bias in OJPs and a proposed approach to effectively adjust OJP data to complement existing official data (such as from the JVWS) and improve the measurement of labour demand.
1. Elemental Economics - Introduction to mining.pdfNeal Brewster
After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
[4:55 p.m.] Bryan Oates
OJPs are becoming a critical resource for policy-makers and researchers who study the labour market. LMIC continues to work with Vicinity Jobs’ data on OJPs, which can be explored in our Canadian Job Trends Dashboard. Valuable insights have been gained through our analysis of OJP data, including LMIC research lead
Suzanne Spiteri’s recent report on improving the quality and accessibility of job postings to reduce employment barriers for neurodivergent people.
Decoding job postings: Improving accessibility for neurodivergent job seekers
Improving the quality and accessibility of job postings is one way to reduce employment barriers for neurodivergent people.
Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
How Does CRISIL Evaluate Lenders in India for Credit RatingsShaheen Kumar
CRISIL evaluates lenders in India by analyzing financial performance, loan portfolio quality, risk management practices, capital adequacy, market position, and adherence to regulatory requirements. This comprehensive assessment ensures a thorough evaluation of creditworthiness and financial strength. Each criterion is meticulously examined to provide credible and reliable ratings.
3. 3-3
1. Understand basic accounting
terminology.
2. Explain double-entry rules.
3. Identify steps in the accounting cycle.
4. Record transactions in journals, post to ledger
accounts, and prepare a trial balance.
5. Explain the reasons for preparing adjusting
entries.
6. Prepare financial statements from the
adjusted trial balance.
7. Prepare closing entries.
8. Prepare financial statements for a
merchandising company.
After studying this chapter, you should be able to:
The Accounting Information
System3
LEARNING OBJECTIVES
4. 3-4
Collects and processes transaction data.
Disseminates financial information to interested parties.
Varies widely from business to business.
► Nature of business
► Type of transactions
► Size of business
► Volume of data
► Informational demands
ACCOUNTING INFORMATION SYSTEM
Accounting Information System (AIS)
LO 1
5. 3-5
Helps management answer such questions as:
How much and what kind of debt is outstanding?
Were our sales higher this period than last?
What assets do we have?
What were our cash inflows and outflows?
Did we make a profit last period?
Are any of our product lines or divisions operating at a loss?
Can we safely increase our dividends to shareholders?
Is our rate of return on net assets increasing?
ACCOUNTING INFORMATION SYSTEM
LO 1
6. 3-6
Event
Transaction
Account
Real Account
Nominal Account
Ledger
Journal
Posting
Trial Balance
Adjusting Entries
Financial Statements
Closing Entries
ACCOUNTING INFORMATION SYSTEM
LO 1
Basic Terminology
7. 3-7
1. Understand basic accounting terminology.
2. Explain double-entry rules.
3. Identify steps in the accounting cycle.
4. Record transactions in journals, post to ledger
accounts, and prepare a trial balance.
5. Explain the reasons for preparing adjusting
entries.
6. Prepare financial statements from the
adjusted trial balance.
7. Prepare closing entries.
8. Prepare financial statements for a
merchandising company.
After studying this chapter, you should be able to:
The Accounting Information
System3
LEARNING OBJECTIVES
8. 3-8
An account shows the effect of transactions on a given
asset, liability, equity, revenue, or expense account.
Double-entry accounting system (two-sided effect).
Recording done by debiting at least one account and
crediting another.
DEBITS must equal CREDITS.
Debits and Credits
ACCOUNTING INFORMATION SYSTEM
LO 2
9. 3-9
Account Name
Debit / Dr. Credit / Cr.
Debits and Credits
An arrangement that shows the
effect of transactions on an
account.
Debit = “Left”
Credit = “Right”
Account
An Account can be
illustrated in a T-
Account form.
LO 2
10. 3-10
Account Name
Debit / Dr. Credit / Cr.
$10,000 Transaction #2$3,000
8,000
Balance
Transaction #1
Transaction #3
If the sum of Debit entries are greater than the sum of
Credit entries, the account will have a debit balance.
Debits and Credits
LO 2
$15,000
11. 3-11
Account Name
Debit / Dr. Credit / Cr.
If the sum of Credit entries are greater than the sum of
Debit entries, the account will have a credit balance.
$10,000 Transaction #2$3,000
8,000 Transaction #3
Balance
Transaction #1
Debits and Credits
LO 2
$1,000
12. 3-12
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 Balance
Equity
Chapter
3-26
Debit / Dr. Credit / Cr.
Normal BalanceNormal Balance
RevenueRevenue
Normal
Balance
Credit
Normal
Balance
Debit
Debits and Credits Summary
LO 2
14. 3-14
Relationship among the assets, liabilities and equity of a
business:
The equation must be in balance after every transaction. For
every Debit there must be a Credit.
ILLUSTRATION 3-3
Expanded Equation and
Debit/Credit Rules and Effects
The Accounting Equation
LO 2
15. 3-15
Assets Liabilities Equity= +
1. Owners invest $40,000 in exchange for ordinary
shares.
+ 40,000 + 40,000
Double-Entry System Illustration
LO 2
16. 3-16
Assets Liabilities= +
2. Disburse $600 cash for secretarial wages.
- 600 - 600
(expense)
Equity
Double-Entry System Illustration
LO 2
17. 3-17
Assets Liabilities= +
3. Purchase office equipment priced at $5,200, giving a
10 percent promissory note in exchange.
+ 5,200 + 5,200
Equity
Double-Entry System Illustration
LO 2
22. 3-22
Double-Entry System Illustration
Assets Liabilities= +
8. Pay cash of $16,000 for a delivery van.
- 16,000
+ 16,000
Note that the accounting equation equality is
maintained after recording each transaction.
Equity
LO 2
23. 3-23
Ownership structure dictates the types of accounts that are
part of the equity section.
Proprietorship or
Partnership
Corporation
Share capital
Share premium
Dividends
Retained Earnings
Financial Statements and Ownership Structure
Capital account
Drawing account
LO 2
26. 3-26
1. Understand basic accounting terminology.
2. Explain double-entry rules.
3. Identify steps in the accounting cycle.
4. Record transactions in journals, post to ledger
accounts, and prepare a trial balance.
5. Explain the reasons for preparing adjusting
entries.
6. Prepare financial statements from the
adjusted trial balance.
7. Prepare closing entries.
8. Prepare financial statements for a
merchandising company.
After studying this chapter, you should be able to:
The Accounting Information
System3
LEARNING OBJECTIVES
28. 3-28
An item should be recognized in the financial statements if it
1. meets the definition of an element,
2. is probable that any future economic benefit
associated with the item will flow to or from the entity,
and
3. has a cost or value that can be measured reliably.
THE ACCOUNTING CYCLE
Identifying and Recording Transactions and
Other Events
LO 3
29. 3-29
1. Understand basic accounting terminology.
2. Explain double-entry rules.
3. Identify steps in the accounting cycle.
4. Record transactions in journals, post to
ledger accounts, and prepare a trial
balance.
5. Explain the reasons for preparing adjusting
entries.
6. Prepare financial statements from the
adjusted trial balance.
7. Prepare closing entries.
8. Prepare financial statements for a
merchandising company.
After studying this chapter, you should be able to:
The Accounting Information
System3
LEARNING OBJECTIVES
30. 3-30
General Journal – a chronological list of transactions and other
events, expressed in terms of debits and credits to accounts.
Journal Entries are recorded in the journal.
September 1: Shareholders invested ₺15,000 cash in the
corporation in exchange for ordinary shares.
ILLUSTRATION 3-7
Journalizing
LO 4
31. 3-31
Posting – The process of transferring amounts from the journal
to the ledger accounts.
ILLUSTRATION 3-8
Posting
ILLUSTRATION 3-7
Advance slide in presentation mode to reveal answers. LO 4
33. 3-33
An Expanded Example
The purpose of transaction analysis is
(1) to identify the type of account involved, and
(2) to determine whether a debit or a credit is required.
Keep in mind that every journal entry affects one or more of the
following items: assets, liabilities, equity, revenues, or expense.
Posting
LO 4
34. 3-34
1. October 1: Shareholders invest ₺100,000 cash in an
advertising venture to be known as Pioneer Advertising
Agency Inc.
Share Capital—Ordinary 100,000
Cash 100,000Oct. 1
Debit Credit
Cash
100,000 100,000
Debit Credit
Share Capital—Ordinary
ILLUSTRATION 3-9
Posting
LO 4
35. 3-35
2. October 1: Pioneer purchases office equipment costing
₺50,000 by signing a 3-month, 12%, ₺50,000 note payable.
Notes payable 50,000
Equipment 50,000Oct. 1
Debit Credit
Equipment
50,000 50,000
Debit Credit
Notes Payable
ILLUSTRATION 3-10
Posting
LO 4
36. 3-36
3. October 2: Pioneer receives a ₺12,000 cash advance from
KC, a client, for advertising services that are expected to be
completed by December 31.
Unearned Service Revenue 12,000
Cash 12,000Oct. 2
Debit Credit
Cash
100,000 12,000
Debit Credit
Unearned Service Revenue
12,000
ILLUSTRATION 3-11
Posting
LO 4
37. 3-37
4. October 3: Pioneer pays ₺9,000 office rent, in cash, for
October.
Cash 9,000
Rent Expense 9,000Oct. 3
Debit Credit
Cash
100,000 9,000
Debit Credit
Rent Expense
12,000
9,000
ILLUSTRATION 3-12
Posting
LO 4
38. 3-38
5. October 4: Pioneer pays ₺6,000 for a one-year insurance
policy that will expire next year on September 30.
Cash 6,000
Prepaid Insurance 6,000Oct. 4
Debit Credit
Cash
100,000 6,000
Debit Credit
Prepaid Insurance
12,000
9,000
6,000
ILLUSTRATION 3-13
Posting
LO 4
39. 3-39
6. October 5: Pioneer purchases, for ₺25,000 on account, an
estimated 3-month supply of advertising materials from
Aero Supply.
Accounts Payable 25,000
Supplies 25,000Oct. 5
Debit Credit
Supplies
25,000 25,000
Debit Credit
Accounts Payable
ILLUSTRATION 3-14
Posting
LO 4
40. 3-40
7. October 9: Pioneer signs a contract with a local newspaper
for advertising inserts (flyers) to be distributed starting the
last Sunday in November. Pioneer will start work on the
content of the flyers in November. Payment of ₺7,000 is due
following delivery of the Sunday papers containing the
flyers.
ILLUSTRATION 3-15
Posting
A business transaction has not occurred. There is only an
agreement between Pioneer Advertising and the newspaper for
the services to be provided in November. Therefore, no journal
entry is necessary in October.
LO 4
41. 3-41
8. October 20: Pioneer’s board of directors declares and pays
a ₺5,000 cash dividend to shareholders.
Cash 5,000
Dividends 5,000Oct. 20
Debit Credit
Cash
100,000 5,000
Debit Credit
Dividends
12,000
9,000
6,000
5,000
ILLUSTRATION 3-16
Posting
LO 4
42. 3-42
9. October 26: Employees are paid every four weeks. The
total payroll is ₺2,000 per day. The pay period ended on
Friday, October 26, with salaries of ₺40,000 being paid.
Cash 40,000
Salaries and Wages Expense 40,000Oct. 26
Debit Credit
Cash
100,000 40,000
Debit Credit
Salaries and Wages Expense
12,000
9,000
6,000
5,000
40,000
ILLUSTRATION 3-17
Posting
LO 4
43. 3-43
10. October 31: Pioneer receives ₺28,000 in cash and bills
Copa Company ₺72,000 for advertising services of
₺100,000 provided in October.
Accounts Receivable 72,000
Cash 28,000Oct. 31
Debit Credit
Cash
100,000 72,000
Debit Credit
Accounts Receivable
12,000
9,000
6,000
5,000
40,000
Service Revenue 100,000
100,000
Debit Credit
Service Revenue
28,000
80,000
ILLUSTRATION 3-18
Posting
44. 3-44
A Trial Balance
List of each account and its balance in the order in
which they appear in the ledger.
Debit balances listed in the left column and credit
balance in the right column.
Used to prove the mathematical equality of debit and
credit balances.
Uncovers errors in journalizing and posting.
Trial Balance
LO 4
46. 3-46
1. Understand basic accounting terminology.
2. Explain double-entry rules.
3. Identify steps in the accounting cycle.
4. Record transactions in journals, post to ledger
accounts, and prepare a trial balance.
5. Explain the reasons for preparing
adjusting entries.
6. Prepare financial statements from the
adjusted trial balance.
7. Prepare closing entries.
8. Prepare financial statements for a
merchandising company.
After studying this chapter, you should be able to:
The Accounting Information
System3
LEARNING OBJECTIVES
47. 3-47
Makes it possible to:
Report on the statement of financial position the
appropriate assets, liabilities, and equity at the statement
date.
Report on the income statement the proper revenues
and expenses for the period.
► Revenues are recorded in the period in which services
are performed.
► Expenses are recognized in the period in which they are
incurred.
Adjusting Entries
LO 5
48. 3-48
Adjusting Entries
1. Prepaid Expenses.
Expenses paid in cash
before they are used or
consumed.
Deferrals
3. Accrued Revenues.
Revenues for services
performed but not yet
received in cash or recorded.
4. Accrued Expenses.
Expenses incurred but not
yet paid in cash or recorded.
2. Unearned Revenues.
Cash received before
services are performed.
Accruals
Illustration 3-20
Types of Adjusting Entries
LO 5
49. 3-49
Deferrals are expenses or revenues that are recognized at a
date later than the point when cash was originally exchanged.
Two types of deferrals
Prepaid expenses
Unearned revenues
If a company does not make an adjustment for these deferrals,
the asset and liability are overstated, and
the related expense and revenue are understated.
Adjusting Entries for Deferrals
LO 5
51. 3-51
Prepaid Expenses. Assets paid for and recorded before a
company uses them.
Adjusting Entries for Prepaid Expenses
Insurance
Supplies
Advertising
Cash Payment Expense RecordedBEFORE
Rent
Buildings and equipment
Prepayments often occur in regard to:
LO 5
52. 3-52
Supplies. Pioneer purchased advertising supplies costing
₺25,000 on October 5. Prepare the journal entry to record the
purchase of the supplies.
Cash 25,000
Supplies 25,000Oct. 5
Debit Credit
Supplies
25,000 25,000
Debit Credit
Cash
Adjusting Entries for Prepaid Expenses
LO 5
53. 3-53
Supplies. An inventory count at the close of business on
October 31 reveals that ₺10,000 of supplies are still on hand.
Supplies 15,000
Supplies Expense 15,000Oct. 31
Debit Credit
Supplies
25,000 15,000
Debit Credit
Supplies Expense
15,000
10,000
Adjusting Entries for Prepaid Expenses
LO 5
54. 3-54
Adjusting Entries for
Prepaid Expenses
Statement
Presentation:
Supplies identifies that
portion of the asset’s
cost that will provide
future economic benefit.
ILLUSTRATION 3-35
56. 3-56
Insurance. On Oct. 4th, Pioneer paid ₺6,000 for a one-year fire
insurance policy, beginning October 1. Show the entry to
record the purchase of the insurance.
Cash 6,000
Prepaid Insurance 6,000Oct. 4
Debit Credit
Prepaid Insurance
6,000 6,000
Debit Credit
Cash
Adjusting Entries for Prepaid Expenses
LO 5
57. 3-57
Insurance. An analysis of the policy reveals that ₺500 (₺6,000 ÷
12) of insurance expires each month. Thus, Pioneer makes the
following adjusting entry.
Prepaid Insurance 500
Insurance Expense 500Oct. 31
Debit Credit
Prepaid Insurance
6,000 500
Debit Credit
Insurance Expense
500
5,500
Adjusting Entries for Prepaid Expenses
LO 5
60. 3-60
Depreciation. Pioneer estimates depreciation on its office
equipment to be ₺400 per month. Pioneer recognizes
depreciation for October by the following adjusting entry.
Accumulated Depreciation 400
Depreciation Expense 400Oct. 31
Debit Credit
Depreciation Expense
400 400
Debit Credit
Accumulated Depreciation
Adjusting Entries for Prepaid Expenses
LO 5
63. 3-63
Receipt of cash before the services are performed is recorded
as a liability called unearned revenues.
Rent
Airline tickets
Tuition
Cash Receipt Revenue RecordedBEFORE
Magazine subscriptions
Customer deposits
Unearned revenues often occur in regard to:
Adjusting Entries for Unearned Revenues
LO 5
64. 3-64
Unearned Revenue. Pioneer received ₺12,000 on October 2
from KC for advertising services expected to be completed by
December 31. Show the journal entry to record the receipt on
Oct. 2nd.
Unearned Service Revenue 12,000
Cash 12,000Oct. 2
Debit Credit
Cash
12,000 12,000
Debit Credit
Unearned Service Revenue
Adjusting Entries for Unearned Revenues
65. 3-65
Debit Credit
Service Revenue
100,000 12,000
Debit Credit
Unearned Service Revenue
4,000
8,000
Unearned Revenues. An evaluation of the service Pioneer
performed for Knox during October, the company determines
that it should recognize 4,000 of revenue in October.
Service Revenue 4,000
Unearned Service Revenue 4,000Oct. 31
4,000
Adjusting Entries for Unearned Revenues
LO 5
68. 3-68
Accruals are made to record
revenues for services performed and
expenses incurred in the current accounting period.
Without an accrual adjustment, the
revenue account (and the related asset account) or the
expense account (and the related liability account) are
understated.
Adjusting Entries for Accruals
LO 5
70. 3-70
Revenues recorded for services performed for which cash has
yet to be received at statement date are accrued revenues.
Adjusting Entries for Accrued Revenues
Rent
Interest
Services performed
BEFORE
Accrued revenues often occur in regard to:
Cash ReceiptRevenue Recorded
Adjusting entry results in:
LO 5
71. 3-71
Accrued Revenues. In October Pioneer performed services
worth ₺2,000 that were not billed to clients on or before October
31. Pioneer makes the following adjusting entry.
Service Revenue 2,000
Accounts Receivable 2,000Oct. 31
Debit Credit
Accounts Receivable
72,000
Debit Credit
Service Revenue
100,000
4,000
2,000
106,000
2,000
74,000
Adjusting Entries for Accrued Revenues
73. 3-73
Expenses incurred but not yet paid in cash or recorded.
Rent
Interest
BEFORE
Accrued expenses often occur in regard to:
Cash PaymentExpense Recorded
Taxes
Salaries
Adjusting entry results in:
Adjusting Entries for Accrued Expenses
LO 5
74. 3-74
Accrued Interest. Pioneer signed a three-month, 12%, note
payable in the amount of ₺50,000 on October 1. The note
requires interest at an annual rate of 12 percent. Three factors
determine the amount of the interest accumulation:
1 2 3
ILLUSTRATION 3-29
Formula for Computing
Interest
Adjusting Entries for Accrued Expenses
LO 5
75. 3-75
Interest Payable 500
Interest Expense 500Oct. 31
Debit Credit
Interest Expense
500 500
Debit Credit
Interest Payable
Accrued Interest. Pioneer signed a three-month, 12%, note
payable in the amount of ₺50,000 on October 1. Prepare the
adjusting entry on Oct. 31 to record the accrual of interest.
Adjusting Entries for Accrued Expenses
LO 5
77. 3-77
Accrued Salaries. At October 31, the salaries and wages for
these days represent an accrued expense and a related liability to
Pioneer. The employees receive total salaries of ₺10,000 for a
five-day work week, or ₺2,000 per day.
Adjusting Entries for Accrued Expenses
LO 5
78. 3-78 LO 5
Salaries and Wages Payable 6,000
Salaries and Wages Expense 6,000Oct. 31
Debit Credit
Salaries and Wages Expense
40,000 6,000
Debit Credit
Salaries and Wages Payable
Accrued Salaries. Employees receive total salaries of ₺10,000 for
a five-day work week, or ₺2,000 per day. Prepare the adjusting
entry on Oct. 31 to record accrual for salaries.
6,000
46,000
Adjusting Entries for Accrued Expenses
80. 3-80
Salaries and Wages Expense 34,000
Salaries and Wages Payable 6,000Nov. 23
34,000 6,000
Accrued Salaries. On November 23, Pioneer will again pay total
salaries of ₺40,000. Prepare the entry to record the payment of
salaries on November 23.
Cash 40,000
6,000
Adjusting Entries for Accrued Expenses
Debit Credit
Salaries and Wages Expense
34,000 6,000
Debit Credit
Salaries and Wages Payable
LO 5
81. 3-81
Bad Debts. Assume Pioneer reasonably estimates a bad debt
expense for the month of ₺1,600. It makes the adjusting entry for
bad debts as follows.
Adjusting Entries for Accrued Expenses
Allowance for Doubtful Accounts
Bad Debt ExpenseOct. 31
1,600
1,600
ILLUSTRATION 3-32
Adjustment for Bad Debt
Expense
LO 5
83. 3-83
Shows the balance
of all accounts,
after adjusting
entries, at the end
of the accounting
period.
Proves the equality
of the total debit
and credit balances
ILLUSTRATION 3-33
Adjusted
Trial
Balance
84. 3-84
1. Understand basic accounting terminology.
2. Explain double-entry rules.
3. Identify steps in the accounting cycle.
4. Record transactions in journals, post to ledger
accounts, and prepare a trial balance.
5. Explain the reasons for preparing adjusting
entries.
6. Prepare financial statements from the
adjusted trial balance.
7. Prepare closing entries.
8. Prepare financial statements for a
merchandising company.
After studying this chapter, you should be able to:
The Accounting Information
System3
LEARNING OBJECTIVES
85. 3-85
Financial Statements are prepared directly from the
Adjusted Trial Balance.
Statement
of Financial
Position
Income
Statement
Retained
Earnings
Statement
Preparing Financial Statements
LO 6
88. 3-88
To achieve the vision of “24/7 accounting,” a company must be able to
update revenue, income, and statement of financial position numbers
every day within the quarter (and potentially publish them on the
Internet). Such real-time reporting responds to the demand for more
timely financial information made available to all investors—not just to
analysts with access to company management.
Two obstacles typically stand in the way of 24/7 accounting:
having the necessary accounting systems to close the books on a daily
basis, and reliability concerns associated with unaudited real-time
data. Only a few companies have the necessary accounting
capabilities.
WHAT’S YOUR PRINCIPLE24/7 ACCOUNTING
LO 6
89. 3-89
1. Understand basic accounting terminology.
2. Explain double-entry rules.
3. Identify steps in the accounting cycle.
4. Record transactions in journals, post to ledger
accounts, and prepare a trial balance.
5. Explain the reasons for preparing adjusting
entries.
6. Prepare financial statements from the
adjusted trial balance.
7. Prepare closing entries.
8. Prepare financial statements for a
merchandising company.
After studying this chapter, you should be able to:
The Accounting Information
System3
LEARNING OBJECTIVES
90. 3-90
Closing Entries
Reduce the balance of nominal (temporary) accounts to zero
in preparation for the next period’s transactions.
Transfer all revenue and expense account balances (income
statement accounts) to Retained Earnings.
Statement of financial position (asset, liability, and equity)
accounts are not closed.
Dividends are closed directly to Retained Earnings.
Income Summary account may be used however it has no
effect on the financial statements.
Basic Process
LO 7
93. 3-93
Accounting Cycle Summarized
1. Enter the transactions of the period in appropriate journals.
2. Post from the journals to the ledger (or ledgers).
3. Prepare an unadjusted trial balance (trial balance).
4. Prepare adjusting journal entries and post to the ledger(s).
5. Prepare a trial balance after adjusting (adjusted trial balance).
6. Prepare the financial statements from the adjusted trial balance.
7. Prepare closing journal entries and post to the ledger(s).
8. Prepare a trial balance after closing (post-closing trial balance).
9. Prepare reversing entries (optional) and post to the ledger(s).
Reversing entries are
covered in Appendix 3B.
LO 7
94. 3-94
The economic volatility of the past few years has left companies hungering for
more timely and uniform financial information to help them react quickly to fast-
changing conditions. As one expert noted, companies were extremely focused
on trying to reduce costs as well as better plan for the future, but a lot of them
discovered that they didn’t have the information they needed and they didn’t
have the ability to get that information. The unsteady recession environment
also made it risky for companies to interrupt their operations to get new
systems up to speed. So what to do? Try to piecemeal upgrades each year or
start a major overhaul of their internal systems? One company, for example,
has standardized as many of its systems as possible and has been steadily
upgrading them over the past decade. Acquisitions can also wreak havoc on
reporting systems. This company is choosy about when to standardize for
companies it acquires, but it sometimes has to implement new systems after
international deals. In other situations, a major overhaul is needed. For
example, it is common for companies with a steady stream of acquisitions to
have 50 to 70 general ledger systems. In those cases, a company cannot react
well unless its systems are made compatible. So is it the big bang (major
overhaul) or the piecemeal approach? It seems to depend. One thing is
certain—good accounting systems are a necessity. Without one, the risk of
failure is high.
WHAT’S YOUR PRINCIPLEHEY, IT’S COMPLICATED
Source: Emily Chasan, ”The Financial-Data Dilemma,” Wall Street Journal (July 24, 2012), p. B4.
LO 7
95. 3-95
1. Understand basic accounting terminology.
2. Explain double-entry rules.
3. Identify steps in the accounting cycle.
4. Record transactions in journals, post to ledger
accounts, and prepare a trial balance.
5. Explain the reasons for preparing adjusting
entries.
6. Prepare financial statements from the
adjusted trial balance.
7. Prepare closing entries.
8. Prepare financial statements for a
merchandising company.
After studying this chapter, you should be able to:
The Accounting Information
System3
LEARNING OBJECTIVES
99. 3-99
ACCOUNTING INFORMATION SYSTEMS
As indicated in this chapter, companies must have an effective accounting
system. In the wake of accounting scandals at U.S. companies like Sunbeam,
Rite-Aid, Xerox, and WorldCom, U.S. lawmakers demanded higher assurance
on the quality of accounting reports. Since the passage of the Sarbanes-Oxley
Act of 2002 (SOX), companies that trade on U.S. exchanges are required to
place renewed focus on their accounting systems to ensure accurate reporting.
GLOBAL ACCOUNTING INSIGHTS
100. 3-100
Relevant Facts
Following are the key similarities and differences between U.S. GAAP and
IFRS related to accounting information systems.
Similarities
• International companies use the same set of procedures and records to
keep track of transaction data. Thus, the material in Chapter 3 dealing with
the account, general rules of debit and credit, and steps in the recording
process—the journal, ledger, and chart of accounts—is the same under both
U.S. GAAP and IFRS.
• Transaction analysis is the same under U.S. GAAP and IFRS but, as you
will see in later chapters, different standards sometimes impact how
transactions are recorded.
GLOBAL ACCOUNTING INSIGHTS
101. 3-101
Relevant Facts
Similarities
• Both the FASB and IASB go beyond the basic definitions provided in this
textbook for the key elements of financial statements, that is, assets,
liabilities, equity, revenues, and expenses.
• A trial balance under U.S. GAAP follows the same format as shown in the
textbook. As shown in the textbook, currency signs are typically used only in
the trial balance and the financial statements. The same practice is followed
under U.S. GAAP.
GLOBAL ACCOUNTING INSIGHTS
102. 3-102
Relevant Facts
Differences
• Rules for accounting for specific events sometimes differ across countries.
For example, European companies rely less on historical cost and more on
fair value than U.S. companies. Despite the differences, the double- entry
accounting system is the basis of accounting systems worldwide.
• Internal controls are a system of checks and balances designed to prevent
and detect fraud and errors. While most public U.S. companies have these
systems in place, many non-U.S. companies have never completely
documented them nor had an independent auditor attest to their
effectiveness. Both of these actions are required under SOX. Enhanced
internal control standards apply only to large public companies listed on
U.S. exchanges.
GLOBAL ACCOUNTING INSIGHTS
103. 3-103
About The Numbers
Debate about requiring
foreign companies to
comply with SOX centers
on whether the higher
costs of a good
information system are
making the U.S. securities
markets less competitive.
Presented are statistics for
initial public offerings
(IPOs) in the years since
the passage of SOX.
GLOBAL ACCOUNTING INSIGHTS
104. 3-104
About The Numbers
Note the U.S. share of
IPOs has steadily
declined, and some critics
of the SOX provisions
attribute the decline to the
increased cost of
complying with the internal
control rules, others are
not so sure. These
commentators argue that
growth in non-U.S.
GLOBAL ACCOUNTING INSIGHTS
markets is a natural consequence of general globalization of capital flows.
105. 3-105
On the Horizon
High-quality international accounting requires both high-quality accounting
standards and high-quality auditing. Similar to the convergence of U.S. GAAP
and IFRS, there is a movement to improve international auditing standards.
The International Auditing and Assurance Standards Board (IAASB) functions
as an independent standard-setting body. It works to establish high-quality
auditing and assurance and quality-control standards throughout the world.
Whether the IAASB adopts internal control provisions similar to those in SOX
remains to be seen. You can follow developments in the international audit
arena at http:// www.ifac.org/iaasb/.
GLOBAL ACCOUNTING INSIGHTS
106. 3-106
Most companies use accrual-basis accounting. They
recognize revenue when the performance obligation is satisfied
and
expenses in the period incurred,
without regard to the time of receipt or payment of cash.
Under the strict cash-basis, companies
record revenue only when they receive cash, and
record expenses only when they disperse cash.
Cash basis financial
statements are not in
conformity with IFRS.
LO 9 Differentiate the cash basis of accounting
from the accrual basis of accounting.
APPENDIX 3A
CASH-BASIS ACCOUNTING VERSUS
ACCRUAL-BASIS ACCOUNTING
107. 3-107
Illustration: Quality Contractor signs an agreement to construct a
garage for ₺22,000. In January, Quality begins construction, incurs
costs of ₺18,000 on credit, and by the end of January delivers a
finished garage to the buyer. In February, Quality collects ₺22,000
cash from the customer. In March, Quality pays the ₺18,000 due the
creditors.
ILLUSTRATION 3A-1
Advance slide in presentation
mode to reveal answers.
APPENDIX 3A
CASH-BASIS ACCOUNTING VERSUS
ACCRUAL-BASIS ACCOUNTING
LO 9
108. 3-108
Illustration: Quality Contractor signs an agreement to construct a
garage for ₺22,000. In January, Quality begins construction, incurs
costs of ₺18,000 on credit, and by the end of January delivers a
finished garage to the buyer. In February, Quality collects ₺22,000
cash from the customer. In March, Quality pays the ₺18,000 due the
creditors.
Advance slide in presentation
mode to reveal answers.
APPENDIX 3A
CASH-BASIS ACCOUNTING VERSUS
ACCRUAL-BASIS ACCOUNTING
ILLUSTRATION 3A-2
LO 9
109. 3-109
CONVERSION FROM CASH TO ACCRUAL BASIS
Illustration: Dr. Diane Windsor, like many small business owners, keeps
her accounting records on a cash basis. In the year 2015, Dr. Windsor
received ₺300,000 from her patients and paid ₺170,000 for operating
expenses, resulting in an excess of cash receipts over disbursements of
₺130,000 (₺300,000 - ₺170,000). At January 1 and December 31, 2015,
she has accounts receivable, unearned service revenue, accrued
liabilities, and prepaid expenses as shown below.
ILLUSTRATION 3A-5
APPENDIX 3A
CASH-BASIS ACCOUNTING VERSUS
ACCRUAL-BASIS ACCOUNTING
LO 9
110. 3-110
ILLUSTRATION 3A-8
Advance slide in presentation mode to reveal answers.
APPENDIX 3A SERVICE REVENUE COMPUTATION
LO 9
To convert the amount of cash received from patients to service
revenue on an accrual basis, we must consider changes in accounts
receivable and unearned service revenue during the year.
ILLUSTRATION 3A-5
111. 3-111
ILLUSTRATION 3A-11
Advance slide in presentation mode to reveal answers.
APPENDIX 3A OPERATING EXPENSE COMPUTATION
LO 9
To convert cash paid for operating expenses during the year to
operating expenses on an accrual basis, we must consider changes in
prepaid expenses and accrued liabilities.
ILLUSTRATION 3A-5
112. 3-112 LO 9
APPENDIX 3A
CONVERSION FROM CASH BASIS TO
ACCRUAL BASIS
ILLUSTRATION
3A-12
113. 3-113
THEORETICAL WEAKNESSES OF THE CASH BASIS
Today’s economy is considerably more lubricated by
credit than by cash.
The accrual basis, not the cash basis, recognizes all
aspects of the credit phenomenon.
Investors, creditors, and other decision makers seek
timely information about a company’s future cash flows.
APPENDIX 3A
CASH-BASIS ACCOUNTING VERSUS
ACCRUAL-BASIS ACCOUNTING
LO 9
114. 3-114 LO 10 Identifying adjusting entries that may be reversed.
ILLUSTRATION 3B-1
APPENDIX 3B USING REVERSING ENTRIES
ILLUSTRATION OF REVERSING ENTRIES-ACCRUALS
115. 3-115
APPENDIX 3B USING REVERSING ENTRIES
ILLUSTRATION OF REVERSING ENTRIES-DEFERRALS
ILLUSTRATION 3B-2
LO 10
116. 3-116
1. All accruals should be reversed.
2. All deferrals for which a company debited or credited the original
cash transaction to an expense or revenue account should be
reversed.
3. Adjusting entries for depreciation and bad debts are not
reversed.
Reversing entries do not have to be used.
APPENDIX 3B USING REVERSING ENTRIES
SUMMARY OF REVERSING ENTRIES
LO 10
117. 3-117 LO 11 Prepare a 10-column worksheet.
A company prepares a worksheet either on
columnar paper or
within a computer spreadsheet.
A company uses the worksheet to adjust
account balances and
to prepare financial statements.
APPENDIX 3C USING A WORKSHEET: THE ACCOUNTING
CYCLE REVISITED
118. 3-118
Trial Balance Columns
Adjustment Columns
APPENDIX 3C USING A WORKSHEET: THE ACCOUNTING
CYCLE REVISITED
WORKSHEET COLUMNS
LO 11
119. 3-119
APPENDIX 3C USING A WORKSHEET: THE ACCOUNTING
CYCLE REVISITED
ILLUSTRATION 3C-1 (Partial)
Use of a Worksheet
LO 11
121. 3-121
The Worksheet:
provides information needed for preparation of the
financial statements.
Sorts data into appropriate columns, which facilitates the
preparation of the statements.
APPENDIX 3C USING A WORKSHEET: THE ACCOUNTING
CYCLE REVISITED
PREPARING FINANCIAL STATEMENTS FROM A
WORKSHEET
LO 11