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Chapter 2

ACG2021 Chapter 2: Michelman


Department
Accounting: General
Course Code
ACG2021
Professor
Michelman
Chapter
2

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Chapter 2
Basis of financial statements
C1: Explain the steps in processing transactions and the role of source documents
Process to go from transactions and events to financial statements
Identify each transaction or event from source documents
Analyze each transaction or event using the accounting equation
Record relevant transactions and events in a journal
Post journal information to ledger accounts
Prepare and analyze the trial balance and financial statement
Source documents- Identify and describe transactions and events entering the
accounting system
Sales receipts
Checks
Purchase orders
Bills from suppliers
Payroll records
Bank statements
The account “underlyingfinancial statements
C2: Describe an account and its use in recording transactions
Account- A record of increases or decreases in a specific asset, liability, equity,
revenue or expense
Ledger- A record of all accounts used by a company
Asset accounts
Cash
Accounts receivable
Notes receivable
Inventory
Prepaid accounts
Supplies
Investments in land
Equipment
Buildings
Land
Patents
Liability accounts
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