ACCT 2001 Chapter : Chapter 3 Class Notes

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15 Mar 2019

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The accounting information system is a system of: collecting, processing transaction data, communicating fin info to decision makers. Transactions are economic events that require recording in the fin stmts. Assets, liabilities, or stockholders" equity items change as a result of some economic event. There is a dual effect on the accounting equation. The account: record of increases & decreases in a specific item, debit left, credit right. Double-entry system: each transaction must affect two or more accounts to keep the basic accounting equation in balance, recording done by debiting at least one account and crediting another, debits must equal credits. If debits are greater than credits, the account will have a credit balance. If credits are greater than debits, the account will have a debit balance. Cr. normal: assets debits should be greater than credits, liabilities credits should be greater than debits, the normal balance is on the increase side.

Related Questions

Cooking with QuickBooks Discussion

Part 1:

Benefits of QuickBooks Software

Who knew how much work it could be to run a restaurant?! You are doing well in your new business and have done a wonderful job exploring the accounting equation, chart of accounts, and recording transactions. Previously, you did some research to find out what QuickBooks is and how it might be helpful in recording business transactions. You will do a bit more research on QuickBooks here to find out what it is capable of, beyond just recording business transactions. Explain to your classmates how QuickBooks might be able to help you with the trial balance and financial statements.

Part 2:

Pay the Cooks

By now, your fictitious restaurant has been up and running for a short time. Hopefully your customers are all going home with a full stomach and a plan to return again soon! You have already looked at how QuickBooks might help you begin to record your business transactions. Explain the five basic steps of transaction analysis. After explaining the steps, walk through the steps for the following transaction: You paid your kitchen cooks $500 in cash for their first week of work.

Case Study 04:

Geeta Rani is the treasurer of a local gymnastics club. As treasurer she is required to identify invoices for payment, prepare the cheque and in conjunction with the president sign the cheques, mail the cheque and update customer accounts.

Required:

a) Explain the weaknesses in the Accounting Information System that are not protecting Geeta in carrying out her duties.

b) The process of reviewing the recording procedures for an Accounting Information system should include three areas. What are they?

c) Define explanatory notes. Why companies need to prepare them?

d) Explain the key principles and practices of budgetary control and implications for

accounting systems.

e) Explain the key features of financial legislation relating to taxable transactions and

reporting requirements.

Record (journalize) transactions in the books) Doherty Tree Cellular, Inc.,
completed the following transactions during April 2012, its first month of operations:

Apr 1	Received $19,800 and issued common stock.
2	Purchased $200 of office supplies on account.
4	Paid $14,300 cash for land to use as a building site.
6	Performed service for customers and received cash of $2,600.
9	Paid $100 on accounts payable.
17	Performed service for UFax on account totaling $1,900.
23	Collected $100 from UFax on account.
30	Paid the following expenses: salary, $1,900; rent, $1,300.

1.Record the transactions in the journal of Doherty Tree Cellular, Inc. Key transactions by date and include an explanation for each entry.

CLASS, LETS TAKE RECORDING STEP 1 STEP FURTHER - THE TRIAL BALANCE

Now that we know what the accounting equation is and we have some experience with Journal Entries.

Letâs review the process and take the recording process one step further.

STEP 1) Analyze transaction: As an actual accountant, we determine if a transaction should be recorded by analyzing source documents.

For example: If the Company makes a sale; they will complete a sales document (or sales
tape is generated). If the Company purchases something a purchase invoice is forwarded to Accounting. There is a different type of source documents for different types of transactions.

Note: as an accountant a large part of the battle is making sure there is a source document for all transactions and that all departments capture and forward these documents to Accounting!

STEP 2) Accounting prepares journal entry: for each transaction based on GAAP. (Mostly using the constraints, assumptions, principles we've discussed: materiality, conservatism, matching, revenue recognition, etc).

The entry is entered into a Journal for those types of Transactions (There is a Sales Journal, A/P Journal for purchases, Payroll journal for payroll related entries, General Journal for misc. entries., etc.

Journal entries are made in the proper form, and include: date, description, indent of credit side of each entry.

STEP 3) The Journal entry is posted to General ledger; which includes all activity for all accounts.

However, the recording process is not over. Letâs talk about the trial balance. Please answer ALL however only post ONE question at a time to allow more to participate.

1) Why do we prepare it?

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ACCT 2001 Chapter : Chapter 3 Class Notes

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