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2-2-11Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Chapter 2Chapter 2Measuring Business TransactionsMeasuring Business Transactions
OverviewGayle M. Richardson,Gayle M. Richardson,
CPA, ProfessorCPA, Professor
2-2-22Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Concepts DiscussedConcepts Discussed
What is the generally accepted ways of solving measurement issues of recognition, valuation, and classification?
What is a Chart of Accounts and how to recognize commonly used accounts?
What is the double-entry system and what are the rules?.
2-2-33Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
What are steps for transaction analysis and processing to simple transactions.
How to record transactions in the general journal
How to post transactions from the general journal to the ledger.
7. How to prepare a trial balance and describe its value and limitations.
2-2-44Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Measurement IssuesMeasurement Issues
Explain, in simple terms, the generally accepted ways of solving the measurement issues of recognition, valuation, and classification.
2-2-55Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Measurement IssuesMeasurement Issues Business transactions are economic
events that affect the financial position of a business entity.
To measure a transaction an accountant must decide:1. When did the transaction occur?2. What value should be placed on the transaction?3. How should the components of the transaction be categorized?
Even though GAAP are followed, controversy does exist regarding these questions.
2-2-66Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
The Recognition IssueThe Recognition Issue Recognition refers to the difficulty of
deciding when a business transaction should be recorded.
The is the time determined for recording a transaction.EXAMPLE: A company orders, receives, and pays for an office desk. The transaction is recorded when the
title transfers--when ownership changes from one business to another.
The recognition issue is not always solved easily.
2-2-77Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
The Valuation IssueThe Valuation Issue Perhaps the most controversial issue in
accounting. Valuation focuses on assigning a monetary
value to a business transaction. GAAP requires the use of historical cost.
Cost is defined as the exchange price associated with a business transaction at the point of recognition.
Purpose of accounting is to account for value in terms of cost, not in terms of value, which can change over time.
Value means the cost at the time of the transaction.
2-2-88Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
The Cost PrincipleThe Cost Principle The cost principle is the practice of
recording transactions at cost. The market value of an asset may
change over the years, but its recorded cost remains in the accounting records.
The market value is the result of the actions of independent buyers and sellers who agree on a price.
The cost principle is used because the cost is verifiable.
2-2-99Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
The Classification IssueThe Classification Issue Classification is assigning all the
transactions in which a business engages to appropriate categories or accounts.
Proper classification depends on:1. Correctly analyzing the effect of
each transaction on the business, and2. Maintaining a system of accounts
that reflects that effect.
2-2-1010Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
DiscussionDiscussion
Q. What three issues underlie most accounting measurement decisions?
A. The three issues that underlie most accounting decisions are recognition (when a transaction should be recorded), valuation (what value should be placed on the transaction), and classification (how the components should be categorized).
2-2-1111Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Accounts and the Chart of Accounts and the Chart of AccountsAccounts
Describe the chart of accounts and recognize commonly used accounts.
2-2-1212Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
AccountsAccounts Business people need to be able to
retrieve transaction data quickly and in usable form.
A filing system consisting of accounts is used to sort out or classify all the transactions that occur in a business.
Accounts are the basic storage unit for accounting data and are used to accumulate amounts from similar transactions.
2-2-1313Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
An accounting system has a separate account for each asset, liability, and each component of owner’s equity, including revenues and expenses.
2-2-1414Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
An accounting system has a separate account for each asset, liability, and each component of owner’s equity, including revenues and expenses.
A small organization may have only a few dozen accounts; a multinational corporation may require thousands of accounts.
2-2-1515Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
An accounting system has a separate account for each asset, liability, and each component of owner’s equity, including revenues and expenses.
A small organization may have only a few dozen accounts; a multinational corporation may require thousands of accounts.
The group of company accounts is known as the general ledger or simply ledger.
2-2-1616Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
An accounting system has a separate account for each asset, liability, and each component of owner’s equity, including revenues and expenses.
A small organization may have only a few dozen accounts; a multinational corporation may require thousands of accounts.
The group of company accounts is known as the general ledger or simply ledger.
The general ledger may be manual or computer-based.
2-2-1717Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
The Chart of AccountsThe Chart of Accounts Accounts are numbered to make them
easy to find. The list of all account numbers and
names is known as the chart of accounts. Accounts are numbered for processing
and reference purposes. The account number may be coded to provide
information about the account. An asset account typically starts with 1. A liability account typically starts with 2.
2-2-1818Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Management needs a detailed breakdown of revenues and expenses for budgeting and operating purposes.
2-2-1919Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Management needs a detailed breakdown of revenues and expenses for budgeting and operating purposes.
Accounting gives management information about whether it has achieved its primary goal of earning a net income.
2-2-2020Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Account TitlesAccount Titles The title should describe what is
recorded in the account. If an account title is not
recognizable, examine the context of the name. Determine if it is an asset, liability,
owner’s investment, owner’s withdrawal, revenue, or expense.
Look for the kind of transaction that gave rise to the account.
2-2-2121Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Typical Asset AccountsTypical Asset Accounts
Cash Accounts Receivable Supplies Inventory Office Equipment Buildings Land Prepaid Rent, Prepaid Insurance
2-2-2222Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Typical Liability AccountsTypical Liability Accounts
Accounts Payable Notes or Loans Payable Salaries Payable Income Taxes Payable
2-2-2323Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Not-so-typical liability accountNot-so-typical liability account
Unearned Revenue
2-2-2424Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
DiscussionDiscussion
Q. What is an account, and how is it related to the ledger?
A. An account is the means by which management accumulates the effects of transactions; it is the basic storage unit for accounting data. The ledger is the file or book in which the company’s accounts are kept.
2-2-2525Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable
2-2-2626Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable Liability
2-2-2727Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable Liability
Supplies
2-2-2828Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable Liability
Supplies Asset
2-2-2929Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable Liability
Supplies Asset
Withdrawals
2-2-3030Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense Short Short
Accounts Payable Liability
Supplies Asset
Withdrawals None of these
2-2-3131Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable Liability
Supplies Asset
Withdrawals None of these
Fees Earned
2-2-3232Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable Liability
Supplies Asset
Withdrawals None of these
Fees Earned Revenue
2-2-3333Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable Liability
Supplies Expense
Supplies Asset
Withdrawals None of these
Fees Earned Revenue
2-2-3434Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable Liability
Supplies Expense Expense
Supplies Asset
Withdrawals None of these
Fees Earned Revenue
2-2-3535Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable Liability
Supplies Expense Expense
Supplies Asset
Accounts Receivable
Withdrawals None of these
Fees Earned Revenue
2-2-3636Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable Liability
Supplies Expense Expense
Supplies Asset
Accounts Receivable Asset
Withdrawals None of these
Fees Earned Revenue
2-2-3737Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable Liability
Supplies Expense Expense
Supplies Asset
Accounts Receivable Asset
Withdrawals None of these
Unearned Revenue
Fees Earned Revenue
2-2-3838Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable Liability
Supplies Expense Expense
Supplies Asset
Accounts Receivable Asset
Withdrawals None of these
Unearned Revenue Liability
Fees Earned Revenue
2-2-3939Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable Liability
Supplies Expense Expense
Supplies Asset
Accounts Receivable Asset
Withdrawals None of these
Unearned Revenue Liability
Fees Earned Revenue
Equipment
2-2-4040Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Identify each account as an Asset, Identify each account as an Asset, Liability, Revenue or ExpenseLiability, Revenue or Expense
Accounts Payable Liability
Supplies Expense Expense
Supplies Asset
Accounts Receivable Asset
Withdrawals None of these
Unearned Revenue Liability
Fees Earned Revenue
Equipment Asset
2-2-4141Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
The Double-Entry System: The Double-Entry System: The Basic Method of The Basic Method of
AccountingAccounting
The double-entry system and
rules for double entry.
2-2-4242Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
The Double-Entry SystemThe Double-Entry System Evolved during the
Renaissance. Described by
Luca Pacioli, Italy, 1494.
2-2-4343Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Features of the Features of the Double-Entry SystemDouble-Entry System
Principle of duality. Each transaction must be recorded
with at least one debit and one credit so that monetary value of debits and credits are equal.
The whole system is always in balance.
All accounting systems are based on the principle of duality.
2-2-4444Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
The T AccountThe T AccountTitle of Account
Debit
(left) side
Credit
(right) side
2-2-4545Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
The T Account IllustratedThe T Account IllustratedCash
(1) 50,000 (2) 35,000(5) 1,500 (4) 200(7) 1,000 (8) 1,000
(9) 400 (11) 600
52,500 37,200Bal. 15,300
- Footings, the total of each side are computed. The difference between the debit side and the credit side is the account’s balance, either debit or credit.
2-2-4646Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Analyzing and Processing Analyzing and Processing TransactionsTransactions
Every transaction affects at least two accounts.
Total debits must equal total credits. Assets = Liabilities + Owner’s Equity.
Assets = Liabilities + O/E
Debitfor
increases(+)
Creditfordecreases(-)
Debitfor
decreases(-)
Creditforincreases(+)
Debitfor
decreases(-)
Creditforincreases(+)
2-2-4747Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Application of Debit/Credit Application of Debit/Credit Rules to O/ERules to O/E
• Debit is commonly abbreviated Dr.Dr.• Credit is commonly abbreviated Cr.Cr.
+ Owner’s Investment- Owner’s Withdrawal+ Revenues- Expenses
Assets = Liabilities
2-2-4848Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Mrs. Richardson’s AWE/CLRMrs. Richardson’s AWE/CLR Increased with a
DEBIT
Assets Withdrawals Expenses
Increased with a CREDIT
Contributions Liabilities Revenue
2-2-4949Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Are we having fun yet?????Are we having fun yet?????
2-2-5050Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Steps in Analyzing and Steps in Analyzing and Processing TransactionsProcessing Transactions1. Analyze the transaction to
determine its effect on assets, liabilities, and O/E.- Supported by a source document.
2. Apply the rules of double entry.- Dr. increases an asset.- Cr. Increases a liability.
2-2-5151Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Steps in Analyzing and Steps in Analyzing and Processing Transactions Processing Transactions (continued)(continued)
3. Record the entry. Enter in chronological order in a journal. Enter the date/debit account/debit
amount on one line. Enter the credit account/credit amount
indented on the next line.
Dr.Dr. Cr.Cr.
June 1 Cash 100,000
Notes Payable 100,000
This form is called journal form and usually is followed by an explanation. The explanation must pass the bus test.
2-2-5252Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Steps in Analyzing and Steps in Analyzing and Processing Transactions Processing Transactions (continued)(continued)
4. Post the entry. Post the entry to the general ledger by
transferring the date and amount to the proper account.
5. Prepare the trial balance to confirm the balance of the accounts. Confirm that the accounts are still in
balance after recording and posting transactions.
2-2-5353Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Transaction Analysis Transaction Analysis IllustratedIllustrated
Apply the steps for transactionanalysis and processing to
simpletransactions.
2-2-5454Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Exercise Exercise Michelle Donato Begins Michelle Donato Begins
Business.Business.
2-2-5555Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Michelle begins business.Michelle begins business.
Dr. Cr.Jan. 1 Cash 4,300
Equipment 1,600 Michelle, Capital 5,900
Cash
Jan. 1 Jan. 1 4,3004,300
Michelle, Capital
Jan. 1 Jan. 1 5,9005,900
Equipment
Jan. 1 Jan. 1 1,6001,600
2-2-5656Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Rents an office, pays $400 rent for Rents an office, pays $400 rent for the current month.the current month.
2-2-5757Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Rents an office, pays $400 rent for Rents an office, pays $400 rent for the current month. the current month.
•Transaction
•Analysis
•Rules
•Entry
Dr. Cr.Jan. 2 Rent Expense 400 Cash 400
Cash
Jan. 1 4,300
Rent Expense
Jan 2. 400Jan 2. 400
Jan. 2 400Jan. 2 400
2-2-5858Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Purchased repair supplies on Purchased repair supplies on credit $500credit $500
2-2-5959Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Purchased repair supplies on Purchased repair supplies on credit $500credit $500
Dr. Cr.Jan. 4 Repair Supplies 500 Accounts Payable 500
Repair Supplies
Jan. 4 500Jan. 4 500•Transaction
•Analysis
•Rules
•Entry4 5004 500
Accounts Payable
2-2-6060Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Purchased additional repair Purchased additional repair equipment for cash $300equipment for cash $300
2-2-6161Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Purchased additional repair Purchased additional repair equipment for cash $300equipment for cash $300
Dr. Cr.Jan. 4 Repair Equipment 300 Cash 300
Repair Equipment
Jan 1 1,6004 3004 300
•Transaction
•Analysis
•Rules
•EntryJan 2. 400Jan 2. 4004 3004 300
Cash
Jan. 1 4,300
2-2-6262Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Paid salary to a helper $450.Paid salary to a helper $450.
2-2-6363Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Dr. Cr.Jan. 6 Salaries Expense 450 Cash 450
Salaries Expenses
Jan. 6 450Jan. 6 450•Transaction
•Analysis
•Rules
•Entry
Cash
Jan. 1 4,300 Jan 2. 400Jan 2. 4004 3004 30066 450 450
Paid salary to a helper $450. Paid salary to a helper $450.
2-2-6464Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Paid $200 of amount Paid $200 of amount purchased on credit in purchased on credit in
transaction c.transaction c.
2-2-6565Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Paid $200 of amount Paid $200 of amount purchased on credit in purchased on credit in
transaction c. transaction c. Dr. Cr.Jan. 8 Accounts Payable 200 Cash 200
Cash
Jan. 1 4,300
Accounts Payable
•Transaction
•Analysis
•Rules
•Entry
Jan 2. 400Jan 2. 4004 3004 300
66 450 450 8 2008 200
Jan. 8 200Jan. 8 200 4 5004 500
2-2-6666Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Withdrew $600 from the Withdrew $600 from the business for living expensesbusiness for living expenses
2-2-6767Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Withdrew $600 from the Withdrew $600 from the business for living expensesbusiness for living expenses
Dr. Cr. Jan. 30 Owner’s Withdrawal 600 Cash 600
Cash
Michelle, Withdrawals
•Transaction
•Analysis
•Rules
•Entry
Jan. 31 600Jan. 31 600
Jan. 1 4,300 Jan 2. 400Jan 2. 4004 3004 30066 450 4508 2008 20030 60030 600
2-2-6868Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Collects a fee of $860 for Collects a fee of $860 for repairs completed.repairs completed.
2-2-6969Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Collects a fee of $860 for Collects a fee of $860 for repairs completed. repairs completed.
Dr. Cr.Jan. 31 Cash 860 Repair Fees Earned 860
Cash
Advertising Fees Earned
•Transaction
•Analysis
•Rules
•Entry
Jan. 31 860Jan. 31 860
Jan. 1 4,300 3131 860 860
Jan 2. 400Jan 2. 4004 3004 30066 450 4508 2008 20030 60030 600
2-2-7070Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Still having fun?Still having fun?
2-2-7171Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Record transactions in the general journal.
The General JournalThe General Journal
2-2-7272Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
The General JournalThe General Journal A journal is a record of all transactions A separate journal entry is used to
record each transaction
2-2-7373Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
The General JournalThe General Journal Entries include the following: The date Names of the accounts debited and the
dollar amounts Names of the accounts credited and the
dollar amounts An explanation of the transaction
2-2-7474Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
PostingPosting Post transactions from the
journal to the ledger
2-2-7575Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
The Trial BalanceThe Trial Balance The total of debits and credits in the accounts
must be equal. A trial balance is prepared periodically (usually
on the last day of the month) to test this equality.
Steps in preparing a trial balance:1. List each ledger account that has a balance, debit balances in the right column, credit balances in the left column.2. Add (foot) each column.3. Compare the totals of the two columns.
2-2-7676Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
The trial balance proves whether or not the total of all debits recorded equals the total of all credits recorded.
2-2-7777Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
An account may have a balance other than its normal balance. An asset account may have a credit
balance. A liability account may have a debit
balance. The trial balance proves whether or
not the total of all debits recorded equals the total of all credits recorded.
It does not prove that the transactions were analyzed correctly or recorded for the correct amounts or in the proper accounts.
2-2-7878Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Trial BalanceTrial Balance
Cash 5,380$ Accounts Receivable 660 Supplies 330 Computers 4,780 Office Equipment 3,950 Accounts Payable 860$ Pat McNally, Capital 13,600 Pat McNally, Withdrawals 300 Tuition Revenue 1,990 Salaries Expense 440 Utilities Expense 90 Rent Expense 260 Repair Expense 40 Advertising Expense 190
16,420$ 16,450$
VIP Secretarial TrainingTrial Balance
7/31/98
Is there something wrong??
2-2-7979Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
Q. Arrange the following six items in sequence to show the flow of events through the accounting system: a. Analysis of the transaction b. Debits and credits posted from the journal to the ledger
c. Occurrence of a business transactiond. Preparation of the financial statements
e. Entry made in the journal
f. Preparation of the trial balance
A. c, a, e, b, f, d
DiscussionDiscussion
2-2-8080Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
1. Explain, in simple terms, the generally accepted ways of solving the measurement issues of recognition, valuation, and classification.
2. Describe the chart of accounts and recognize commonly used accounts.
OK, LET’S REVIEW . . .
2-2-8181Copyright Gayle M. Richardson, CPA. All rights reserved.Sept. 2000.
3. Define double-entry system and state the rules for double entry.
4. Apply the steps for transaction analysis and processing to simple transactions.
5. Prepare a trial balance and describe its value and limitations.
CONTINUING OUR REVIEW . . .