Chapter 2

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AIS

Transaction Processing

Readied for the next fiscal period's entries

Closing entries

Temporary accounts are transferred into retained earnings

General-purpose financial statements

Statement of cash flow

reports inflows and outflows of cash for a specified period

Balance sheet

finacial psition of an organization at a specific point

assets, liabilities, and equity

Statement of changes in schareholders' equity

reports changes in capital stock and retained earnings accounts

Income Statment

reports revenues, expenses, gains, and losses

accrual basis for a specified period of time

Adjusting entries

are done to account for timing differences in the flow of cash

After journalized and posted, prepare an adjusted trial balance

Trial balance

organinzes the balances from the general ledger

to show if the debits and credits a equal in the ledger

Not always error prof

Journals

Recorded chronological list of the transactions

post to the ledger to the right accounts

Analysis

identify the accounts

Identify the effect on the account

Which financial statement does each account effect

determine if its a debit or dredit entry

verify, debits equal the credits

Coding Systems

Common coding systems

Sequential coding

Block coding

Hierarchical codes

Mnemonic codes

maintain a clear, logical chart of accounts

Account normaly have both a name and a number to identify

Informatin Technology

Can generate reports with the touch of a button aswell

including financial statement

Transactions can post automatically or with the touch of a button

Cut down steps in the accounting cycle

Human judgment

Estimating amounts and interpreting accounting rules

Recognizing recordable transactions

Designing source documents