ACCOUNTING NOTES – CHAPTER 3
- The system of collecting and processing transaction data and communication financial
information is the accounting information system.
- Transactions are economic events that must be recorded in the financial statements.
- Not all events are recorded
- Transaction analysis determines impact on the accounting equation
- Occurs when assets, liabilities or shareholder’s equity items change as a result of some
- Must always balance
- Assets = Liabilities + Shareholders’ Equity
Transaction Identification Process
- An individual accounting record of increases and decreases in a specific Asset, Liability,
or Shareholders’ Equity item.
- Three Parts: The title for the account, the left or debit side, and the right or credit side. The T Account
- Total the entries to each side. If the greater sum is on the left, the account has a debit
- Total the entries to each side. If the greater sum is on the right, the account has a credit