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2. Day #3. Accounting Information System. Chapter. UAA – ACCT 201 Principles of Financial Accounting Dr. Fred Barbee. 2. Accounting Information System. Chapter.

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accounting information system

2

Day

#3

Accounting Information System

Chapter

UAA – ACCT 201 Principles of Financial Accounting Dr. Fred Barbee

accounting information system2

2

Accounting Information System

Chapter

First . . . A brief review of Day #2 Topics.

slide3

ACCT 201 ACCT 201 ACCT 201

Debits and

Credits

debits and credits
Debits and Credits
  • The debit/credit convention or coding system is very simple.
  • Do not make it difficult because you cannot accept its simplicity.
debits
Debits
  • Debit comes from Latin and merely means “left,” or the “left-hand” side of an account. Abbreviated “DR.”
slide6

Account Title

Left Side

We need to stop here and change our way of thinking!

Debit Side

symbolically let s erase that memory
Symbolically, let’s erase that memory

C:\memory\debit\erase *.*

All files in directory will be deleted

Are you sure (Y/N)?

credits
Credits
  • Credit also comes from the Latin, and means “right,” or the “right-hand” side of an account. Abbreviated “CR.”
slide9

Account Title

Right Side

Let’s stop here and modify our thinking – at least for this class!

Credit Side

symbolically let s erase that memory10
Symbolically, let’s erase that memory

C:\memory\credit\erase *.*

All files in directory will be deleted

Are you sure (Y/N)?

slide11

ACCT 201 ACCT 201 ACCT 201

The algebraic relationship in the fundamental accounting model.

Assets

Liabilities

=

Owners’ Equity

+

slide12

ACCT 201 ACCT 201 ACCT 201

Account Title

Debit

Credit

Always

slide13

Assets

=

DR

CR

Liabilities

+

+

-

Owners’ Equity

DR

CR

-

+

DR

CR

-

+

the second equality

ACCT 201 ACCT 201 ACCT 201

The Second Equality . . .

Debits

Credits

=

The algebraic relationship between account increases and decreases.

debit credit rules

Account

Inc.

Dec.

Assets

Liabilities

Owners’ Equity

Revenue

Expenses

Debit-Credit Rules . . .

Debit

Credit

Credit

Debit

Credit

Debit

Credit

Debit

Debit

Credit

debit credit rules16

Debits

Credits

Debit-Credit Rules . . .

Increase

Assets

Expenses

Liabilities

Equity

Revenue

Decrease

Liabilities

Equity

Revenue

Assets

Expenses

slide17

ncrease

ebits

IDEA

xpenses

ssets

slide18

evenues

quity

RELIC

iabilities

ncrease

redits

steps in processing transactions

=

+

Assets

Liabilities

Equity

Step 1: Examine source documents.

Step 2: Analyze transactions.

Step 5: Prepare a trial balance.

Step 3: Record transactions in a journal.

Step 4: Record the journal information in a ledger.

Steps in Processing Transactions
general journal for fastforward
General Journal for FastForward
  • Titles of Affected Accounts
  • Transaction Date
  • Transaction explanation
  • Dollar amount of debits and credits
posting journal entries example
Posting Journal Entries - Example

1

Identify the account.

posting journal entries example26
Posting Journal Entries - Example

4

Enter the journal reference.

posting journal entries example28
Posting Journal Entries - Example

6

Enter the ledger reference.

accounting information system29

2

Accounting Information System

Chapter

Text Section:

Trial Balance (p. 63)

learning objective
Learning Objective
  • Prepare and explain the use of a trial balance.
trial balance
Trial Balance
  • A Trial Balance is a listing of all accounts and their balances at a point in time.
accounting information system33

2

Accounting Information System

Chapter

Text Section:

Unadjusted Financial Statements (p. 68)

learning objective34
Learning Objective
  • Prepare unadjusted financial statements from business transactions.
income statement
Income Statement
  • A statement showing revenues and expenses for a period of time.
    • Revenues = Inflows of assets in exchange for products and services provided to customers.
    • Expenses = Outflows or the using up of assets that result from providing products and services to customers.
slide36

Exh.

2.19

statement of retained earnings
Statement of Retained Earnings
  • A statement showing additions to (net income) and deductions from (net loss, dividends) the Retained Earnings account.
slide38

Exh.

2.19

balance sheet
Balance Sheet
  • A statement showing the balances in asset, liability, and equity accounts at a point in time.
slide40

Exh.

2.19

statement of cash flows
Statement of Cash Flows
  • A statement showing the sources and uses of funds relating to the
    • Operating
    • Investing, and
    • Financing
  • Activities of a company.
slide42

Exh.

2.19

formatting conventions
Formatting Conventions

Generally, dollar signs ($) are not used in the journals or ledgers.

Round numbers in financial statements to the nearest dollar.

Rounding

accounting information system44

2

Accounting Information System

Chapter

Text Section:

Decision Analysis (p. 70)

learning objective45
Learning Objective
  • Analyze the impact of transactions on accounts and financial statements.
learning objective46
Learning Objective
  • Compute return on equity and use it to analyze company performance.
using the information return on equity
Using the Information - Return on Equity
  • Describes the relationship between net income for the period and average equity.
  • Helps an owner judge the compnay’s profitability compared to other business or personal opportunities.
learning objective48
Learning Objective
  • Compute the debt ratio and describe its use in analyzing company performance.