Chapter 3: The Accounting Information Systems Intermediate Accounting, 11th ed. Kieso, Weygandt, and Warfield.
out of 22
Post on 17-Dec-2015
Slide 1 Chapter 3: The Accounting Information Systems Intermediate Accounting, 11th ed. Kieso, Weygandt, and Warfield Slide 2 1.Understand basic accounting terminology. 2.Explain double entry rules. 3.Identify steps in the accounting cycle. 4.Record transactions in journals, post to ledger accounts, and prepare a trial balance. After studying this chapter, you should be able to: Chapter 3: The Accounting Information Systems Slide 3 5.Explain the reasons for preparing adjusting entries. 6.Prepare closing entries. 7.Explain how inventory accounts are adjusted at year-end. 8.Prepare a 10-column work sheet. Chapter 3: The Accounting Information Systems Slide 4 Accounting data is represented by the following relationship among the assets, liabilities and owners equity of a business: Assets = Liabilities + Owners Equity The equation must be in balance after every recorded transaction in the system. The Basic Accounting Equation Slide 5 Accounting information is based on the double entry system. An account is an arrangement of transactions affecting a given asset, liability or other element. Under this system, the two-sided effect of a transaction is recorded in the appropriate accounts. The recording is done by means of a debit- credit convention (set of rules) applying to all accounts. The Double Entry System Slide 6 The system records the two-sided effect of transactions Transaction Two-sided effect Bought furniture for cash Decrease in one asset Increase in another asset Took a loan in cash Increase in an asset Increase in a liability The Double Entry System Slide 7 Note that the accounting equation equality is maintained after recording each transaction. The Double Entry System Slide 8 Asset Expense Debit Revenue LiabilityEquity Credit Normal balance in account The Account and the Debit-Credit Convention Slide 9 Expanded Basic Equation and Debit/Credit Rules and Effects Slide 10 Debit entries in an asset account Debit entries in an expense account Credit entries in a liability account Credit entries in equity account Credit entries in a revenue account Credit entries in an asset account Credit entries in an expense account Debit entries in a liability account Debit entries in equity account Debit entries in a revenue account Balance increasesBalance decreases The Debit-Credit Convention Slide 11 Owners Equity Net Income Investments by Owners + Net Loss Dividends or Withdrawals - Ownership (Equity) Structure Slide 12 1. Analyze the transaction 2. Journalize the transaction 3. Post the transaction to accounts in ledger 4. Prepare the (unadjusted) trial balance 5. Prepare necessary adjusting journal entries 6. Prepare the adjusted trial balance 7. Prepare financial statements 8. Prepare closing journal entries for the year 9. Prepare the post-closing trial balance The Accounting Cycle: Steps Slide 13 End Begin Accounting period Adjusting Journal Entries Financial Statements Closing Entries Start over 7 6 5 Unadjusted Trial Balance 4 Originating Journal Entries 2 8 Adjusted Trial Balance Post to Ledger 3 Post-Closing Trial Balance 9 The Accounting Cycle: Steps Slide 14 Adjusting entries are needed for: Recognizing revenue for the period. Matching expenses with revenues they helped generate. Adjusting entries are required every time financial statements are prepared. Adjusting Journal Entries Slide 15 Adjusting Unearned Revenue Recording Accrued Revenue Revenues received in cash and recorded as liabilities Revenues earned but not yet recorded in books Adjusting Entries: Recognizing Revenue Slide 16 Adjusting Prepayments for Expenses Recording Accrued Expense Prepayments made in cash and recorded as assets Expense incurred but not yet recorded in books Adjusting Entries: Matching Expenses Slide 17 Closing entries are made to close all nominal accounts (revenue and expense accounts) for the year. Real (or Permanent) accounts (balance sheet accounts) are not closed. Dividend account is closed to Retained Earnings account. Closing Journal Entries Slide 18 Dividends 4 Ret. Earnings Revenue 2 Income Summary Expense 1 Scheme of Closing Entries 3 Slide 19 In a periodic inventory system, closing entries are made to record cost of goods sold and ending inventory. In a perpetual inventory system, such entries are not required. Closing Entries: Periodic Inventory System Slide 20 A worksheet is a multiple column form that may be used in the adjustment process and in preparing financial statements. The use of a worksheet is optional and not a permanent accounting record. The worksheet does not replace the financial statements. Using a Worksheet Slide 21 Prepare a trial balance on the worksheet. Enter the adjustments in the adjustments column. Enter adjusted balances in the adjusted trial balance columns. Extend adjusted trial balance amounts to appropriate financial statement columns. Total the statement columns, compute net income (loss), and complete the worksheet. Steps in Preparing a Worksheet Slide 22 COPYRIGHT Copyright 2004 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.
View more >
Chapter 20: Accounting for Pensions and Postretirement Benefits Intermediate Accounting, 11th ed. Kieso, Weygandt, and Warfield Prepared by Jep Robertson.
Chapter 21: Accounting for Leases Intermediate Accounting, 11th ed. Kieso, Weygandt, and Warfield Prepared by Jep Robertson and Renae Clark New Mexico.
Intermediate Accounting, 11th ed. Kieso, Weygandt, and Warfield Chapter 5: Balance Sheet and Statement of Cash Flows Systems.
Chapter 6: Accounting and the Time Value of Money Intermediate Accounting, 11th ed. Kieso, Weygandt, and Warfield Prepared by Jep Robertson and Renae Clark.
Chapter 10: Acquisition and Disposition of Property, Plant, and Equipment Intermediate Accounting, 11th ed. Kieso, Weygandt, and Warfield Prepared by Jep.
Chapter 13: Current Liabilities and Contingencies Intermediate Accounting, 11th ed. Kieso, Weygandt, and Warfield Prepared by Jep Robertson and Renae Clark.
Chapter 4: Income Statement and Related Information Intermediate Accounting, 11th ed. Kieso, Weygandt, and Warfield Prepared by Jep Robertson and Renae.
Chapter 23: Statement of Cash Flows Intermediate Accounting, 11th ed. Kieso, Weygandt, and Warfield.
Financial Accounting and Accounting Standards PREVIEW OF CHAPTER Intermediate Accounting IFRS 2nd Edition Kieso, Weygandt, and Warfield 16
Chapter 11: Depreciation, Impairments and Depletion Intermediate Accounting, 11th ed. Kieso, Weygandt, and Warfield.
1-1 Intermediate Accounting 1 Financial Accounting and Accounting Standards Kieso, Weygandt, and Warfield.
Chapter 9: Inventories: Additional Valuation Issues Intermediate Accounting, 11th ed. Kieso, Weygandt, and Warfield.
3-1 Intermediate Accounting 15th Edition 3 The Accounting Information System Kieso, Weygandt, and Warfield.