Rachel Coe Financial Accounting 2021 Chapter 3 Accounting Information Systems Accounting Info Systems include Collecting Processing Communicating Accounting Transactions economic events that require recording in the financial statements Not all activities and economic events represent transactions Assets Liabilities Equity Dual Effect on the accounting equation what happens on one side must happen to the other Analyzing Transactions process of identifying the effects of economic events on the accounting equation In a private account debit is on the left side of the equation while credit occurs on the right An account can be illustrated in the form of a T Account The Account Debit and Credit procedures The double entry system o Debits MUST equal credits o If debits are greater than credits the account will have a debit balance o Assets when debits are greater than credits o Liabilities when credits are greater than debits o Normal balance means the sides of the account which is increasing Procedures for Stockholder s Equity o Investments by stockholders and revenues increase stockholders equity credit o Dividends and expenses decrease stockholder s equity debit o The purpose of earning revenues is to benefit the stockholders Steps in the Recording Process Source documents o The journal book of original entry transactions recorded in chronological order Discloses the complete effects of a transaction Provides a chronological record of transactions Helps to prevent or locate errors because the debit and credit amounts can be easily compared o Journalizing entering transaction data in the journal o The ledger is comprised of the entire group of accounts maintained by a company Example individual asset accounts individual liability accounts individual stock holder s equity account o Chart of accounts listing of accounts used by a company to o Posting is the process of transferring journal entry amounts to record transactions ledger accounts o Steps determine what type of account determine what items increased and decreased and by how much translate increases and decreases into credit and debit o Trial Balance a list of accounts and their balances at a given time Accounts are listed in the order in which they appears in the ledger Purpose is to prove that debits equal credits May also uncover errors in journalizing and posting but is not a guarantee that mistakes haven t been made Useful in the preparation of financial statements o Cash Operating activities Investing activities Financing activities
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