The accounting cycle during the period
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The Accounting Cycle: During the Period. Chapter 2 . Learning Objectives. Identify the basic steps in measuring external transactions Analyze the impact of external transactions on the accounting equation

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The Accounting Cycle: During the Period

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The accounting cycle during the period

The Accounting Cycle: During the Period

Chapter 2


Learning objectives

Learning Objectives

  • Identify the basic steps in measuring external transactions

  • Analyze the impact of external transactions on the accounting equation

  • Assess whether the impact of external transactions results in a debit or credit to an account balance

  • Record transactions using debits and credits

  • Post transactions to T-accounts in the general ledger

  • Prepare a trial balance


Functions of financial accounting

Functions of Financial Accounting

  • Measure business activities of the company

  • Communicate measurements to external parties for decision making


Part a

2-4

Part A

Measuring Business Activities


Learning objective 1

2-5

Learning Objective 1

Identify the Basic Steps in Measuring External Transactions.


External transactions

External Transactions

  • Transactions conducted with a separate economic entity

  • Internal transaction: events that affect the financial position of the company but do not include an exchange with a separate economic entity


Capturing transactions in accounts

Capturing Transactions in Accounts

  • Account: Summary of all transactions related to a particular item over a period of time.

    • Asset accounts: Cash, Supplies, and Equipment

    • Liability accounts: Accounts Payable, Salaries Payable, Utilities Payable, and Taxes Payable

    • Stockholders’ equity accounts: Common Stock and Retained Earnings

  • Chart of accounts: A list of all account names used to record transactions


Measuring external transactions

2-8

Measuring External Transactions


Learning objective 2

2-9

Learning Objective 2

Analyze the impact of external transactions on the accounting equation.


Effects on the basic accounting equation

Effects on the Basic Accounting Equation

  • Each transaction will have a dual effect

    • An increase on one side will increase the other side


Understanding effects of transaction

Understanding Effects of Transaction

  • Ask these questions:

    • What is one account affected by the transaction?

      • Does it increase or decrease?

    • What is a second account affected by the transaction?

      • Does it increase or decrease?

    • Do assets still equal liabilities plus stockholders’ equity?


The expanded accounting equation

2-12

The Expanded Accounting Equation


Part b

2-13

Part B

Debits and Credits


Learning objective 3

2-14

Learning Objective 3

Assess Whether the Impact of External Transactions Results in a Debit or Credit to an Account Balance.


Effects on account balances

2-15

Effects on Account Balances


Debit and credit effects on accounts in the expanded accounting equation

2-16

Debit and Credit Effects on Accounts in the Expanded Accounting Equation


Debit and credit effects on each account type

Debit and Credit Effects on Each Account Type

  • A simpler memory way


Learning objective 4

2-18

Learning Objective 4

Record transactions using debits and credits.


Recording transactions

Recording Transactions

  • Journal: provides a chronological record of all transactions

  • Journal entry: format used for recording transactions

  • Debits in a transaction must equal its credits


Learning objective 5

2-20

Learning Objective 5

Post transactions to T-accounts in the general ledger.


Posting

Posting

  • Posting: process of transferring the debit and credit information from the journal to individual accounts in the general ledger

  • General ledger: includes all accounts used to record the company’s transactions

    • Useful to calculate the account balances

  • T-account: a simplified form of a general ledger account


  • Learning objective 31

    2-22

    Learning Objective 3

    Prepare a Trial Balance.


    Trial balance

    Trial Balance

    • A list of all accounts and their balances at a particular date

      • Shows that total debits equal total credits

      • Assists in preparing adjusting entries

    • Used for internal purposes only

      • Not published to external parties

      • Not required to follow an order of listing


    End of chapter 2

    2-24

    End of Chapter 2


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