...Over the last 500 years, the double-entry system of accounting has provided the accounting profession with a reliable and accurate way of tracking the economic events of companies. However, with the implementation of computer-based accounting systems over the last few decades, event based accounting has gained popularity. The theory behind event based accounting is that each business transaction can be broken down into one, or a combination of three types of events: economic, business, and information. An economic event is one in which the quantity of resources change, such as selling an item or purchasing a service. Events like receiving an invoice from a supplier, or sending out a purchase order to a vendor are examples of business events. They are necessary to the company even though they are not the monetary or physical transactions for goods or services. Tasks like creating reports and inputting new customers are considered information events. Information events provide the necessary data for the economic or business events that transpire. The double-entry system of accounting focuses on taking those separate events and aggregating them into journal entries. By aggregating them, a great deal of the total information of the event is left out. Under an event based accounting system each event is recorded with as much of the information as possible, and then stored in tables of data that allow the user to recall and compile this information into usable reports. This...
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...Accounting is the most basic framework of business. People use accounting in their daily lives when they study financial statements to make investment decisions, assess interest rather to pay off their house mortgage and calculate rates for car payments. God himself recognize accounting, for he said in his Holy Bible that everyone would be accountable before him when this world comes to an end.(Matthew 12:36) The practice of accounting can be traced back to ancient times, with "accounting books" of various forms discovered as early as 3500 B. C. From the time of 3500 B. C., accounting has progressed slowly through the development of the modern double-entry system published by Luca Paciolo in the fifteenth century until the advent of the computer. In 1581 the first college of accountants was organized with power to regulate entry into the field. Along with the development of modern accounting, a stereotypical image of the accountant was developed, because of its task being routine and purity mathematical in function. The accountant is view as a dull person that is chain to his desk all day. A survey of college students proved that accounting is treated with mental formulaic concepts, thus it has a stereotype image. Accounting may be defined as an information system that provides reports to various individuals or groups about economic activities of an organization or other entity. Accounting is information sciences used to collect, classify, and manipulate financial data for...
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...Journal Entries: Reflection and Reader Response • Journal Entry 1: “What does it mean to be a soldier?” (Reflection/RR) • Journal Entry 2: “Only the dead see the end of war…” (Reflection/RR) • Journal Entry #3: “How does being a solider change a man (or woman)? Are people changed for better or worse or both? What is the effect on the person, and what is the effect on the nation?” (Reflection/RR) • Journal Entry #4: “Reflect on the duality of words. How do words hold infinite power in their ability to simultaneously create and destroy? How do words affect conflict? How do they affect people?” (Reflection/RR) • Journal Entry #5: “Who or what determines our respective identities? Who or what makes you who you are? Why? How? Is it fair? Do we have control over who we are? Who we are perceived to be?” (Reflection/RR) • Journal Entry #6: “What does Oscar Schindler prove about people amid war and destruction? What characters have we encountered thus far in the semester who could also fit into this category? Why is it so important we remember them and tell their stories?” (Reflection/RR) • Journal Entry #7: “What does it mean to have courage? Is it truly more honorable to die than to live? Is this always the case? If not, reflect on the ambiguity of such a statement.” (Reflection/RR) • Journal Entry #8: “What tangibles and intangibles do you carry with you every day? Why are they important to you?” (Reflection/RR) • Journal Entry #9: “In your opinion, can there...
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...ACCT290 WEEK 4 REVERSING ENTRIES JOAN GAPP Journal entries are used to change accounting information in financial systems. Following the double-entry system used in modern accounting, these entries always affect at least two accounts -- one account is debited, while another account is credited. A reversing entry is a journal entry that inverts a previously recorded "regular" entry. The use of reversing entries is optional, but it offers certain advantages, making them very popular in the accounting world. When you reverse an entry made in a prior period, you prevent duplication of revenues or expenses, which improves accuracy. For example, you made an entry to recognize a phone expense last month as part of the closing of the month process. Now the bill has been entered in the accounting system, and an expense was again recognized. The reversing entry will zero out the expense, correcting the situation. Reversing entries related to period closing always are paired with entries from the past. You can enter a journal entry in January and reverse it in February to avoid duplication in February. You don't normally go back to January to reverse an entry done in February. Reversing entries is a simple process that can be performed by any employee without much knowledge of accounting. Basically, the account originally debited is now credited and vice versa. There's no need to research or conduct any calculations -- all you need to do is reverse the original entry using the same exact...
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...to traditional procedures that performed by the company in order to record all the business transactions during the accounting periods. There are several sequences includes in the accounting cycle such as identifying, collecting and analyzing documents and business transactions, records the process in journals, posting the journalized amounts to ledger, preparing the trial balances and financial statements. Usually, an accounting cycle of the company begins when a business transaction take place and finishes the accounting cycle when the financial statements are prepared. The period of the accounting...
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...Objectives [pic] Accounting Methods Builder (AMB) Overview [pic] Accounting Methods Builder (AMB) Overview [pic] Accounting Methods Builder (AMB) Overview This diagram shows a hierarchy of the AMB, indicating how the components fit together. The transaction objects and the sources carry transaction information into the rules defined for each component of an entry. These components, i.e. journal line type, account derivation rule, and journal entry descriptions are grouped together as a journal line definition (JLD) for a particular event. For example, you can set up a JLD for an invoice validation event, another for payment creation, and another for payment clearing. The set of rules for a particular subledger application is called the application accounting definition (AAD). The set of AADs for multiple applications is called the subledger accounting method. You can maintain multiple accounting methods. You can set up as many components as you like and use them for different accounting methods. You can set up an accounting method that creates entries in compliance with US GAAP, and another one that complies with IFRS. These two methods could share components, such as entry descriptions, because the journal entry components are modular. The accounting methods are then assigned to each ledger, which determines the rules that are applied when accounting is being generated for...
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...Explain double-entry rules. Explain how transactions affect the accounting equation. Identify the steps in the accounting cycle and the steps in the recording process. Explain the reasons for and prepare adjusting entries. Explain how the type of ownership structure affects the financial statements. Prepare closing entries and consider other matters relating to the closing process. Prepare a 10-column work sheet and financial statements. After studying Appendix 3A, you should be able to: Identify adjusting entries that may be reversed. THE ACCOUNTING INFORMATION SYSTEM The Accounting Information System Basic Terminology Event: The cause of changes of assets, liabilities, and equity Transaction: A transfer or exchange between two or more entities or parties Account: Where transactions are recorded - A separate account is used for each asset, liability, revenue, expense, gain, loss and capital (owner’s equity) Permanent accounts (or “real” accounts) * Asset, liability, and equity accounts * Appear on the balance sheet * Permanent accounts are not closed at year end Temporary accounts (or “nominal” accounts) * Revenue, expense, and dividend accounts * Revenue and expenses are on the income statement; dividends are on the statement of changes in shareholders equity. * Temporary accounts are closed at year end Journalizing and Posting * A Journal is a book of original entry for all transactions * The General...
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...account. 2. “The terms debit and credit mean increase and decrease, respectively.” Do you agree? Explain. I do not agree. We use the terms debit and credit repeatedly in the recording. Debit simply means that the amount is entered on the left side of the account, while the word Credit means that the amount is entered on the right hand. Depending on the transaction, debit or credit will be increased or in some cases it will be decreased. We cannot conclude that Debit implies the increasing value and Credit implies the decreasing value. 3. Heath Precourt, a fellow student, contends that the double-entry system means each transaction must be recorded twice. Is Heath correct? Explain. He is Incorrect. Under the double-entry system, the two-sided effect of each transaction is recorded in appropriate accounts. According to the basic accounting equation, each transaction must affect two or more accounts to keep the basic accounting equation in balance. In in other words, for each transaction, debits must equal credits. The equality of debits and credits provides the basis for the double-entry system of recording transactions. 4. Erica Mendez, a beginning accounting student, believes debit balances are favorable and credit balances are unfavorable. Is Erica correct? Discuss. Erica is not correct. Debit and credit are two actions that are opposite in nature. A debit balance only means that debit amounts exceed credit amounts in an account and a credit balance only means that credit...
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...event – transaction Record transaction in a journal (JOURNALIZE) Journals: a. sales – all sales on account/credit sales (SALES TRANSACTION FILE) b. purchases-all purchases on account/credit purchases (PURCHASES TRANSACTION FILE) c. cash receipts-all transaction where any cash was received even if it is only part of the transaction (CASH RECEIPTS TRANSACTION FILE) d. cash disbursement-all cash paid (checks even if it is only part of the transaction) (CASH DISBURSEMENTS TRANSACTION FILE) e. general journal – everything else (e.g., adjusting entries, closing entries, reversing entries and any transaction that doesn’t belong in the other journals. (GENERAL (JOURNAL) TRANSACTION FILE) F. payroll journal (all payroll transactions) (PAYROLL TRANSACTION FILE) 2. Record the transaction in the Ledger (general and subsidiary) i.e. POST Posting is equivalent to a (master) file update in a computerized (AIS), That is, the transaction in the transaction file are incorporated into the master file balances. General ledger (general ledger master file) Accounts receivable subsidiary ledger (accounts receivable master file) Accounts payable subsidiary ledger (accounts payable master file) Inventory subsidiary ledger (inventory master file) Payroll or employee earnings subsidiary ledger (payroll master file) (Your Waren case project also has a ) Fixed assets subsidiary ledger (fixed assets master file) Etc. 3.prepare a trial balance 4. Record adjusting journal entries Four types...
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...starting with recording business transactions and leading up to the preparation of financial statements. This process demonstrates the purpose offinancial accounting--to create useful financial information in the form of general-purpose financial statements. In other words, the sole purpose of recording transactions and keeping track of expenses and revenues is turn this data into meaning financial information by presenting it in the form of a balance sheet, income statement, statement of owner's equity, and statement of cash flows. The accounting cycle is a set of steps that are repeated in the same order every period. The culmination of these steps is the preparation of financial statements. Some companies prepare financial statements on a quarterly basis whereas other companies prepare them annually. This means that quarterly companies complete one entire accounting cycle every three months while annual companies only complete one accounting cycle per year. Accounting Cycle Steps This cycle starts with a business event. Bookkeepers analyze the transaction and record it in the general journal with a journal entry. The debits and credits from the journal are then posted to the general ledger where an unadjusted trial balance can be prepared. After accountants and management analyze the balances on the unadjusted trial balance, they can then make end of period adjustments like depreciation expense and expense accruals. These adjusted journal entries are posted to the trial balance...
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...of accounting. Accounting is defined as practice and body of knowledge concerned primarily with methods for recording transactions, keeping financial records, performing internal audits, reporting and analyzing financial information to the management, and advising on taxation matters. It is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. It reveals profit or loss for a given period, and the value and nature of a firm's assets, liabilities and owners' equity. Accounting provides information on the resources available to a firm, the meansemployed to finance those resources, and the results achieved through their use. Question 2 Explain the process of accounting cycle. Identify the transaction or other recognizable event. Prepare the transaction’s source document such as a purchase order or invoice. Analyze and classify the transaction. This step involves quantifying the transaction in monetary terms (eg ; RM and cents), identifying the accounts that are affected and whether those accounts are to be credited or debited. Record the transaction by making entries in the appropriate journal, such as sales journal, purchase journal, or general journal. Such entries are made in chronological order. Post general journal entries to the ledger accounts. Prepare the trial balance to make sure that debits equal to credits. The trial balance is a...
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...CHAPTER 2 Learning Objective: 02-01 Analyze routine economic events-transactions-and record their effects on a companys financial position using the accounting equation format. The Marchetti Soup Company entered into the following transactions during the month of June: (1) purchased inventory on account for $245,000 (assume Marchetti uses a perpetual inventory system); (2) paid $60,000 in salaries to employees for work performed during the month; (3) sold merchandise that cost $160,000 to credit customers for $300,000; (4) collected $280,000 in cash from credit customers; and (5) paid suppliers of inventory $225,000. | Analyze each transaction and show the effect of each on the accounting equation for the corporation. (Amounts to be deducted should be indicated by a minus sign. Enter the net change for items which affect more than one account in an account category (i.e., assets, liabilities, etc.)) | | | Assets | = | Liabilities | + | Paid-in capital | + | Retained Earnings | (a) | $245,000 | | $245,000 | | | | | (b) | (60,000) | | | | | | (60,000) | (c) | 140,000 | | | | | | 140,000 | (d) | 0 | | | | | | | (e) | (225,000) | | (225,000) | | | | | A company that has a fiscal year-end of December 31: (1) on October 1, $25,000 was paid for a one-year fire insurance policy; (2) on June 30 the company lent its chief financial officer $23,000; principal and interest at 5% are due in one year; and (3) equipment costing $73...
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...Lecture Notes Week 2 Accounting for Transactions – Fundamentals Part 1 Required Readings: HEM: Chapter 3 Pages 68-81 All required readings must be completed before attending class 14 THE ACCOUNTING EQUATION ASSETS = LIABILITIES + EQUITY This equation must ALWAYS balance. Effects of transactions on the Accounting Equation Transactions are business events which are given accounting recognition, and are inputs to the accounting system. Transactions usually involve a flow of resources. Examples: Every transaction will result in changes to an entity’s assets, liabilities or equity, and After each transaction is recorded, Transaction Analysis First step in the recording process Involves analysing the effects of transactions on the accounting equation: *Identify the items affected: *Determine effect: Note that Revenues and Expenses are treated as a subset of Equity: Revenues Expenses 15 Lecture Problem 1: Murphy’s Law Firm began operations on 1 January. The following transactions occurred during the month of January: Jan 1. The owner contributed cash of $15,000 to start the business Jan 2. Paid $1,200 for rent for January Jan 3. A computer was purchased for $2,200 cash Jan 5. Office furniture was purchased on credit for $4,000 Jan 10. Cash of $500 was received for services performed Jan 22. Billed customers for services provided, $2,500 Jan 24. Paid for the office furniture purchased on Jan 5. Jan 30. Received cash of $2,500 from customers on account...
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...Instructions, Flowcharts and Ledgers location of Cash Receipts Journal in the SUA packet of materials SUA Journals location of General Ledger in the SUA packet of materials SUA Instructions, Flowcharts and Ledgers The reason for not permitting a person who has temporary or permanent custody of an asset to account for that asset is to protect the company against __________________________. fraud. A client's accounting records are unfamiliar to a new auditor. Where would the auditor go to learn the names and numbers of the accounts being debited and credited in the client's transactions? Chart of Accounts Which of the following sequence of steps in the accounting cycle is correct? Prepare documents, record in journals, post to ledgers, and prepare unadjusted trial balance What are the names of Waren's three employees? Ray Kramer, Jim Adams, Nancy Ford The overall objective of the Systems Understanding Aid and this class is to help aid in the understanding and visualization of the entire accounting process How much sales tax applies to wholesale sales according to Illinois state law? No sales tax On January 15, Waren Sports Supply purchased on account $120,000 in from their vendor Velocity Sporting Goods. On February 10 they paid the vendor in full for this purchase. The correct journal entry is Debit Accounts Payable $120,000 Credit Cash $120,000 ...
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...involved within the cycle. Generally the people involved in the accounting cycle would be record-keepers, accounting clerks; financial managers as well as staff accountants all have a hand in the parts of the accounting cycles. Bookkeepers and accounting clerks are generally the ones that record the entries and prepare statements for financial managers and staff accountants to approve. The first step of the accounting cycle would be to identify and analyze the transaction and events that need to be accounted for. Even though the generally accepted accounting principles (GAAP) has guidelines there are no rules to what events or transaction a company is required to record. A company should record every sale or purchase no matter how big or small it is. Once these transactions or events have been analyzed, they are recorded in the next step which is journalizing the transactions. There are several different places these transactions are recorded. Some of these places are the general journal, cash receipts journal, cash disbursements journal, purchases journal, sales journal and other special journals depending on the company (Kieso, Weygandt, & Warfield, 2012). Then these transactions will be posted into the general ledger which usually occurs monthly and subsidiary ledgers which are usually done daily. Once this is done a trial balance is prepared. After the trial balance is done, adjustments are made for such things as accruals, prepayments as well as any estimated items...
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