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Textbook Chapter 3 Notes

by: Tiffany Notetaker

Textbook Chapter 3 Notes ACCT201A

Tiffany Notetaker
Cal State Fullerton
GPA 3.62
Financial Accounting
Glen Hatton

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About this Document

Textbook Notes for ACCT 201A with Glen Hatton.
Financial Accounting
Glen Hatton
Class Notes
acct 201a, glen hatton, financial accounting, textbook notes
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This 2 page Class Notes was uploaded by Tiffany Notetaker on Saturday September 12, 2015. The Class Notes belongs to ACCT201A at California State University - Fullerton taught by Glen Hatton in Summer 2015. Since its upload, it has received 34 views. For similar materials see Financial Accounting in Accounting at California State University - Fullerton.

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Date Created: 09/12/15
Chapter 3 The Accounting Information System Monday September 7 2015 415 PM A The Accounting Information System a Accounting Information System system of collecting and processing transaction data and communicating financial information to decisionmakers i Factors that shape an accounting information system include the nature of the company39s business the types of transactions size of the company volume of data and information demands of management and others ii Electronic Data Processing EDP Systems computerized accounting systems b Accounting Transactions economic events that require recording in the financial statements when assets liabilities or stockholders39 equity items change as a result of some economic event 0 Transaction Analysis process of identifying the specific effects of economic events on the accounting equation i The accounting equation must always balance B The Account a Account individual accounting record of increases and decreases in a specific asset liability stockholders39 equity revenue or expense item consists of the title a left or debit side and a right or credit side Taccount b Debit balance total of the debit amounts exceeds the credits Credit balance total of the credit amounts exceeds the credits C For each transaction debits must equal credits Asset accounts normally show debit balances Liability accounts normally show credit balances i Common stock is issued to investors in exchange for the stockholders39 investment The account is increased by credits and decreased by debits ii Retained earnings is increased by credits and decreased by debits iii Dividends result in a reduction of the stockholders39 claims on retained earnings iv Revenue accounts normally show credit balances and expense accounts normally show debit balances B Steps in the Recording Process a Three basic steps in the recording process analyze each transaction in terms of its effect on the accounts enter the transaction information in a journal transfer the journal information to the appropriate accounts in the ledger b The journal makes three significant contributions to the recording process it discloses in one place the complete effect of a transaction provides a chronological record of transactions and helps to prevent or locate errors because the debit and credit amounts for each entry can be readily compared i J ournalizing entering transaction data in the journal Use correct and specific account titles in journalizing b Ledger entire group of accountants maintained by a company provides balance in each of the accounts as well as keeps track of changes in these balances i General ledger contains all assets liabilities stockholders39 equity revenue and expense accounts b Posting transferring journal entry amounts to ledger accounts in the ledger enter in the appropriate columns of the debited accounts the date and debit amount shown in the journal then do the same with credited accounts c The purpose of transaction analysis is first to identify the type of account involved and then determine whether a debit or a credit to the account is required B The Trial Balance a Trial balance lists accounts and their balances at a given time usually prepared at the end of an accounting period proves mathematical equality of debits and credits after posting uncover errors in journalizing and posting useful in preparation of financial statements i Procedures for preparing a trial balance list the account titles and their balances total the debit and credit column verify the equality of the two columns


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