Basic Rules of an Accounting System

The Matching Principle:

Accruals and Deferrals

Basic Rules of an Accounting System

• A transaction is an economic event that can affect one, two or more items in the financial statements.

Rules determine:

WHATtransactions

are to be recorded

WHENtransactions

are to be recorded

HOWtransactions

are to be recorded

AMOUNTof the

transaction to be

recorded

Framework of an Accounting System

Assets = Liabilities + EquityAssets = Liabilities + Equity

The Accounting EquationThe Accounting Equation

• By expanding the accounting equation, transactions can be analyzed, summarized, and recorded within the integrated financial statement framework.

Integrated Financial Statement Framework: Template