CH2 Transaction Processing in the AIS

Accounting Cycle

Obtain information

Analyze transactions

Record transactions in journal

Post from journal to general ledger accounts

Prepare an unadjusted trial balance

Record adjusting entries and post to the general ledger accounts

Prepare an adjusted trial balance

Prepare financial Statements

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Income StatementStatement of OEBalance SheetStatement of Cash Flows

Close the temporary accounts to RE

Prepare a post-closing trial balance

Accounting and Bookkeeping

Accounting

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Accounting is more than just bookeeping. It goes into concerning itself with identifying those transactions and communicating information for decision making.

Bookkeeping

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Recording Transactions

Coding Systems

Sequential Coding

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Numbers items in a sequence

Block Coding

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Numbers are assigned in blocks; each block is reserved for a particular kind of account. For example, all current assets may start with a "1", while equity accounts might start with a "5".

Hierarchical Codes

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Each digit/block of digits conveys important information to people who know the code.

Mnemonic Codes

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Help people remember the meaning of the code. An example would be course prefixes at a university such as Acct.

Human Judgement and IT

Designing Source Documents

Recognizing recordable transactions

Estimating amounts and interpreting accounting rules