Chapter 2. Analyzing and Recording Transactions

Learning objective

P (Procedural)

C (Conceptual)

Describe recording an transactions. account and (p. its 51)use in recording transactions. P51

Describe a ledger and a chart of accounts. (p. 54)

Define debits and credits and explain double-entry accounting.(p. and 55)

Explain transactions the steps and the in processing androle of source documents. (p. 50)

A (Analyzing)

on Analyze accounts the impact of transactions on accounts and financial statements. p59

Compute its use in analyzing the debt ratio financialand describecondition. (p. 69)

  1. Analyzing and recording process
  1. Analyzing and Processing Transaction
  1. Trial Balance

Process

  1. Record relevant transactions and events in a journal
  1. Post journal information to ledger account
  1. Analyze each transaction and event from source documents
  1. Prepare and analyze the trial balance

Source documents

Defined

Source documents identify and describe transactions and events entering the accounting process.

They are the sources of accounting information and can be in either hard copy or electronic form.

Examples

sales tickets, checks, purchase orders, bills from suppliers, employee earnings records, and bank statements

The Account and Its Analysis

Account

An account is a record of increases and decreases in a specific asset, liability, equity, revenue,or expense item.

Information from an account is analyzed, summarized, and presented in reports and financial statements

The general ledger, or simply ledger

is a record containing all ac-counts used by a company.

The ledger is often in electronic form

Asset Accounts

Defined

Assets are resources owned or controlled by a company and that have expected future benefits.

Most accounting systems include (at a minimum) separate accounts for the assets described here.

Types

Account receivable

Note receivable

Prepaid accounts ( prepaid expenses)

Cash

Supplies

Equipment

Buildings

Liabilities Accounts

Defined

Liabilities are claims (by creditors) against assets, which means they are obligations to transfer assets or provide products or services to others.

Creditors are individuals and organizations that have rights to receive payments from a company.

Accounts payable

note payable

Unearned revenue

Accrued liabilities

wages payable, taxes payable, and interest payable.

Equity Accounts

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