1、,C H A P T E R 3,THE ACCOUNTING INFORMATION SYSTEM,Intermediate AccountingIFRS EditionKieso, Weygandt, and Warfield,Identifying and recordingJournalizingPostingTrial balanceAdjusting entriesAdjusted trial balancePreparing financial statementsClosingPost-closing trial balanceReversing entriesSummary,
2、Accounting Information System,The Accounting Cycle,Financial Statements For Merchandisers,Basic terminologyDebits and creditsAccounting equationFinancial statements and ownership structure,Income statementStatement of retained earningsStatement of financial positionClosing entries,The Accounting Inf
3、ormation System,Collects and processes transaction data.Disseminates the information to interested parties.,Accounting Information System,Accounting Information System (AIS),How much and what kind of debt is outstanding?Were sales higher this period than last?What assets do we have?What were our cas
4、h inflows and outflows?Did we make a profit last period?Are any of our product lines or divisions operating at a loss?Can we safely increase our dividends to shareholders?Is our rate of return on net assets increasing?,Accounting Information System,Helps management answer such questions as:,Basic Te
5、rminology,LO 1 Understand basic accounting terminology.,EventTransactionAccountReal AccountNominal AccountLedger,JournalPostingTrial BalanceAdjusting EntriesFinancial StatementsClosing Entries,Debits and Credits,LO 2 Explain double-entry rules.,An Account shows the effect of transactions on a given
6、asset, liability, equity, revenue, or expense account.Double-entry accounting system (two-sided effect).Recording done by debiting at least one account and crediting another.DEBITS must equal CREDITS.,Debits and Credits,An arrangement that shows the effect of transactions on an account.Debit = “Left
7、”Credit = “Right”,Account,LO 2 Explain double-entry rules.,An Account can be illustrated in a T-Account form.,Account Name,Debit / Dr.,Credit / Cr.,Debits and Credits,If Debit entries are greater than Credit entries, the account will have a debit balance.,LO 2 Explain double-entry rules.,$10,000,Tra
8、nsaction #2,$3,000,$15,000,8,000,Transaction #3,Balance,Transaction #1,Debits and Credits,If Credit entries are greater than Debit entries, the account will have a credit balance.,LO 2 Explain double-entry rules.,$10,000,Transaction #2,$3,000,$1,000,8,000,Transaction #3,Balance,Transaction #1,Normal
9、 Balance Credit,Normal Balance Debit,Debits and Credits Summary,LO 2 Explain double-entry rules.,Statement of Financial Position Income Statement,=,+,=,-,Asset,Liability,Equity,Revenue,Expense,Debit,Credit,Debits and Credits Summary,LO 2 Explain double-entry rules.,The Accounting Equation,LO 2 Expla
10、in double-entry rules.,Relationship among the assets, liabilities and equity of a business:,The equation must be in balance after every transaction. For every Debit there must be a Credit.,Illustration 3-3,Double-Entry System Illustration,Assets,Liabilities,Equity,=,+,Owners invest $40,000 in exchan
11、ge for share capital,+ 40,000,+ 40,000,LO 2 Explain double-entry rules.,Assets,Liabilities,=,+,2. Disburse $600 cash for secretarial wages.,- 600,- 600 (expense),LO 2 Explain double-entry rules.,Double-Entry System Illustration,Equity,Double-Entry System Illustration,Assets,Liabilities,=,+,3.Purchas
12、e office equipment priced at $5,200, giving a 10 percent promissory note in exchange.,+ 5,200,+ 5,200,LO 2 Explain double-entry rules.,Equity,Double-Entry System Illustration,Assets,Liabilities,=,+,4. Received $4,000 cash for services rendered.,+ 4,000,+ 4,000 (revenue),LO 2 Explain double-entry rul
13、es.,Equity,Double-Entry System Illustration,Assets,Liabilities,=,+,5. Pay off a short-term liability of $7,000.,- 7,000,- 7,000,LO 2 Explain double-entry rules.,Equity,Assets,Liabilities,=,+,6. Declared a cash dividend of $5,000.,+ 5,000,- 5,000,LO 2 Explain double-entry rules.,Double-Entry System I
14、llustration,Equity,Double-Entry System Illustration,Assets,Liabilities,=,+,7. Convert a long-term liability of $80,000 into ordinary shares.,- 80,000,+ 80,000,LO 2 Explain double-entry rules.,Equity,Double-Entry System Illustration,Assets,Liabilities,=,+,8. Pay cash of $16,000 for a delivery van.,LO
15、 2 Explain double-entry rules.,- 16,000,+ 16,000,Note that the accounting equation equality is maintained after recording each transaction.,Equity,Ownership structure dictates the types of accounts that are part of the equity section.,Proprietorship or Partnership,Corporation,Share capitalShare prem
16、iumDividendsRetained Earnings,Financial Statements and Ownership Structure,LO 2 Explain double-entry rules.,Capital accountDrawing account,Financial Statements and Ownership Structure,LO 2 Explain double-entry rules.,Equity,Statement of Financial Position,Retained Earnings Statement,Net income or Ne
17、t loss (Revenues less expenses)Income Statement,Dividends,Retained Earnings (Net income retained in business),Share Capital (Investment by shareholders),Illustration 3-4,The Accounting Cycle,LO 3 Identify steps in the accounting cycle.,Transactions,1. Journalization,6. Financial Statements,7. Closin
18、g entries,8. Post-closing trail balance,9. Reversing entries,3. Trial balance,2. Posting,5. Adjusted trial balance,4. Adjustments,Work Sheet,Illustration 3-6,Identify and Recording Transactions,What to Record?An item should be recognized in the financial statements if it is an element, is measurable
19、, and is relevant and a faithful representation.,LO 3 Identify steps in the accounting cycle.,General Journal a chronological record of transactions. Journal Entries are recorded in the journal.,1. Journalizing,LO 4 Record transactions in journals, post to ledger accounts, and prepare a trial balanc
20、e.,September 1: Shareholders invested $15,000 cash in the corporation in exchange for ordinary shares.,Illustration 3-7,Posting the process of transferring amounts from the journal to the ledger accounts.,2. Posting,LO 4 Record transactions in journals, post to ledger accounts, and prepare a trial b
21、alance.,Illustration 3-7,Illustration 3-8,Posting Transferring amounts from journal to ledger.,2. Posting,LO 4,Illustration 3-8,Expanded Example,LO 4 Record transactions in journals, post to ledger accounts, and prepare a trial balance.,2. Posting,The purpose of transaction analysis is to identify t
22、he type of account involved, and to determine whether a debit or a credit is required.,Keep in mind that every journal entry affects one or more of the following items: assets, liabilities, equity, revenues, or expense.,1. October 1: Shareholders invest $100,000 cash in an advertising venture to be
23、known as Pioneer Advertising Agency Inc.,Share capital - ordinary,100,000,Cash,100,000,Oct. 1,Debit,Credit,Cash,100,000,100,000,Debit,Credit,Share Capital - Ordinary,2. Posting,LO 4 Record transactions in journals, post to ledger accounts, and prepare a trial balance.,Illustration 3-9,2. October 1:
24、Pioneer Advertising purchases office equipment costing $50,000 by signing a 3-month, 12%, $50,000 note payable.,Notes payable,50,000,Office equipment,50,000,Oct. 1,Debit,Credit,Office Equipment,50,000,50,000,Debit,Credit,Notes Payable,2. Posting,LO 4 Record transactions in journals, post to ledger a
25、ccounts, and prepare a trial balance.,Illustration 3-10,3. October 2: Pioneer Advertising receives a $12,000 cash advance from KC, a client, for advertising services that are expected to be completed by December 31.,Unearned service revenue,12,000,Cash,12,000,Oct. 2,Debit,Credit,Cash,100,000,12,000,
26、Debit,Credit,Unearned Service Revenue,2. Posting,12,000,LO 4 Record transactions in journals, post to ledger accounts, and prepare a trial balance.,Illustration 3-11,4. October 3: Pioneer Advertising pays $9,000 office rent, in cash, for October.,Cash,9,000,Rent expense,9,000,Oct. 3,Debit,Credit,Cas
27、h,100,000,9,000,Debit,Credit,Rent Expense,2. Posting,12,000,9,000,LO 4 Record transactions in journals, post to ledger accounts, and prepare a trial balance.,Illustration 3-12,5. October 4: Pioneer Advertising pays $6,000 for a one-year insurance policy that will expire next year on September 30.,Ca
28、sh,6,000,Prepaid insurance,6,000,Oct. 4,Debit,Credit,Cash,100,000,6,000,Debit,Credit,Prepaid Insurance,2. Posting,12,000,9,000,6,000,LO 4 Record transactions in journals, post to ledger accounts, and prepare a trial balance.,Illustration 3-13,6. October 5: Pioneer Advertising purchases, for $25,000
29、on account, an estimated 3-month supply of advertising materials from Aero Supply.,Accounts payable,25,000,Advertising supplies,25,000,Oct. 5,Debit,Credit,Advertising Supplies,25,000,25,000,Debit,Credit,Accounts Payable,2. Posting,LO 4 Record transactions in journals, post to ledger accounts, and pr
30、epare a trial balance.,Illustration 3-14,7. October 9: Pioneer Advertising signs a contract with a local newspaper for advertising inserts (flyers) to be distributed starting the last Sunday in November. Pioneer will start work on the content of the flyers in November. Payment of $7,000 is due follo
31、wing delivery of the Sunday papers containing the flyers.,2. Posting,LO 4 Record transactions in journals, post to ledger accounts, and prepare a trial balance.,Illustration 3-15,8. October 20: Pioneer Advertisings board of directors declares and pays a $5,000 cash dividend to shareholders.,Cash,5,0
32、00,Dividends,5,000,Oct. 20,Debit,Credit,Cash,100,000,5,000,Debit,Credit,Dividends,2. Posting,12,000,9,000,6,000,5,000,LO 4 Record transactions in journals, post to ledger accounts, and prepare a trial balance.,Illustration 3-16,9. October 26: Employees are paid every four weeks. The total payroll is
33、 $2,000 per day. The pay period ended on Friday, October 26, with salaries of $40,000 being paid.,Cash,40,000,Salaries expense,40,000,Oct. 26,Debit,Credit,Cash,100,000,40,000,Debit,Credit,Salaries Expense,2. Posting,12,000,9,000,6,000,5,000,40,000,LO 4 Record transactions in journals, post to ledger
34、 accounts, and prepare a trial balance.,Illustration 3-17,10. October 31: Pioneer Advertising receives $28,000 in cash and bills Copa Company $72,000 for advertising services of $100,000 provided in October.,Accounts receivable,72,000,Cash,28,000,Oct. 31,Debit,Credit,Cash,100,000,72,000,Debit,Credit
35、,Accounts Receivable,2. Posting,12,000,9,000,6,000,5,000,40,000,Service revenue,100,000,100,000,Debit,Credit,Service Revenue,28,000,80,000,Illustration 3-18,Trial Balance A list of each account and its balance; used to prove equality of debit and credit balances.,3. Trial Balance,LO 4 Record transac
36、tions in journals, post to ledger accounts, and prepare a trial balance.,Illustration 3-19,4. Adjusting Entries,LO 5 Explain the reasons for preparing adjusting entries.,Makes it possible to:Report on the statement of financial position the appropriate assets, liabilities, and equity at the statemen
37、t date. Report on the income statement the proper revenues and expenses for the period.Revenues are recorded in the period in which they are earned.Expenses are recognized in the period in which they are incurred.,Types of Adjusting Entries,1.Prepaid Expenses. Expenses paid in cash and recorded as a
38、ssets before they are used or consumed.,Deferrals,3. Accrued Revenues. Revenues earned but not yet received in cash or recorded.,4. Accrued Expenses. Expenses incurred but not yet paid in cash or recorded.,2. Unearned Revenues. Revenues received in cash and recorded as liabilities before they are ea
39、rned.,Accruals,LO 5 Explain the reasons for preparing adjusting entries.,Illustration 3-20,Deferrals are either prepaid expenses orunearned revenues.,Adjusting Entries for Deferrals,Illustration 3-21,LO 5 Explain the reasons for preparing adjusting entries.,Payment of cash that is recorded as an ass
40、et because service or benefit will be received in the future.,Adjusting Entries for “Prepaid Expenses”,insurancesuppliesadvertising,Cash Payment,Expense Recorded,BEFORE,rentpurchasing buildings and equipment,Prepayments often occur in regard to:,LO 5 Explain the reasons for preparing adjusting entri
41、es.,Supplies. Pioneer purchased advertising supplies costing$25,000 on October 5. Prepare the journal entry to record the purchase of the supplies.,Cash,25,000,Advertising supplies,25,000,Oct. 5,Debit,Credit,Advertising Supplies,25,000,25,000,Debit,Credit,Cash,Adjusting Entries for “Prepaid Expenses
42、”,LO 5 Explain the reasons for preparing adjusting entries.,Supplies. An inventory count at the close of business on October 31 reveals that $10,000 of the advertising supplies are still on hand.,Advertising supplies,15,000,Advertising supplies expense,15,000,Oct. 31,Debit,Credit,Advertising Supplie
43、s,25,000,15,000,Debit,Credit,Advertising Supplies Expense,15,000,Adjusting Entries for “Prepaid Expenses”,10,000,LO 5 Explain the reasons for preparing adjusting entries.,Statement Presentation:Advertising supplies identifies that portion of the assets cost that will provide future economic benefit.
44、,Adjusting Entries for “Prepaid Expenses”,Illustration 3-35,LO 5 Explain the reasons for preparing adjusting entries.,Statement Presentation:Advertising expense identifies that portion of the assets cost thatexpired in October.,Adjusting Entries for “Prepaid Expenses”,Illustration 3-34,LO 5 Explain
45、the reasons for preparing adjusting entries.,Insurance. On Oct. 4th, Pioneer paid $6,000 for a one-year fire insurance policy, beginning October 1. Show the entry to record the purchase of the insurance.,Cash,6,000,Prepaid insurance,6,000,Oct. 4,Debit,Credit,Prepaid Insurance,6,000,6,000,Debit,Credi
46、t,Cash,Adjusting Entries for “Prepaid Expenses”,LO 5 Explain the reasons for preparing adjusting entries.,Insurance. An analysis of the policy reveals that $500 ($6,000 / 12) of insurance expires each month. Thus, Pioneer makes the following adjusting entry.,Prepaid insurance,500,Insurance expense,5
47、00,Oct. 31,Debit,Credit,Prepaid Insurance,6,000,500,Debit,Credit,Insurance Expense,Adjusting Entries for “Prepaid Expenses”,500,5,500,LO 5 Explain the reasons for preparing adjusting entries.,Statement Presentation:Prepaid Insurance identifies that portion of the assets cost that will provide future
48、 economic benefit.,Adjusting Entries for “Prepaid Expenses”,Illustration 3-35,LO 5 Explain the reasons for preparing adjusting entries.,Statement Presentation:Insurance expense identifies that portion of the assets cost thatexpired in October.,Adjusting Entries for “Prepaid Expenses”,Illustration 3-34,LO 5 Explain the reasons for preparing adjusting entries.,Depreciation. Pioneer Advertising estimates depreciation on its office equipment to be $400 per month. Accordingly, Pioneer recognizes depreciation for October by the following adjusting entry.,
