ACCT 2001 Lecture Notes - Lecture 3: Accounts Receivable, Accounting Equation, Accounting Information System
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Document Summary
Transaction: a business activity that affects the basic accounting equation. Duality of effects: every transaction has at least two effects on the basic accounting equation. Assets must equal liabilities plus stockholders" equity for every accounting transaction. A company always receives something and gives something. A dollar amount is determined for each exchange. As a part of transaction analysis, a name is given to each item exchanged. Accountants refer to these names as account titles. The chart of accounts is tailored to each company"s business, so although some account titles are common across all companies (cash, accounts payable) others may be a unique to a particular company. Steps 2 & 3: record and summarize. One way to record and summarize the financial effects of transactions would be to enter your understanding of their effects into a spreadsheet. Most companies use computerized accounting systems, which can handle a large number of transactions.
