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Chapter 2. Analyzing and Recording Transactions (Learning objective (C…
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)
Analyzing and recording process
Process
Record relevant transactions and events in a journal
Post journal information to ledger account
Analyze each transaction and event from source documents
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
Analyzing and Processing Transaction
Trial Balance