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ch3.pdf

ch3.pdf

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Copyright © 2011 John Wiley & Sons, Inc. Kimmel
Accounting,
4/e Solutions Manual (For Instructor Use Only)
3-1
CHAPTER 3
The Accounting Information System
Study Objectives
1.Analyze the effect of business transactions on the basic accounting equation.2.Explain what an account is and how it helps in the recording process.3.Define debits and credits and explain how they are used to record business transactions.4.Identify the basic steps in the recording process.5.Explain what a journal is and how it helps in the recording process.6.Explain what a ledger is and how it helps in the recording process.7.Explain what posting is and how it helps in the recording process.8.Explain the purposes of a trial balance.9.Classify cash activities as operating, investing, or financing.
Summary of Questions by Study Objectives and Bloom’s Taxonomy
ItemSOBTItemSOBTItemSOBTItemSOBTItemSOBTQuestions
1.4C 6.3C11.3K16.5K21.7K2.1C 7.3C12.3K17.5K22.8AN3.1C 8.3C13.3K18.5AP4.1K 9.3K14.3K19.6C5.2K10.3K15.4K20.8C
Brief Exercises
1.1C 4.3K 7.4C 9.5AP11.8AP2.1AP 5.3C 8.4C10.7AP12.8AP3.1AP 6.5AP
Do It! Review Exercises
1.1C 2.2, 3C 3.4, 5AP 4.6, 7AP
Exercises
1.1C 5.1AP 8.5AP12.5, 8AP15.8AN2.1AP 6.3, 5AP 9.3, 4,5AP13.7, 8AP16.8AP3.1AP 7.3C10.14.5, 8AP17.3K4.1AP11.7, 81, 5,7APAP18.9AP19.9AP
Problems: Set A
1.1AP 5. 6. 7.8AN 9.8AN2.1AP 8.3.1AP3, 5,6, 7,8AP3, 5,6, 7,8AP4.3, 5AP3, 5,6, 7,8AP
Problems: Set B
1.1AP 5. 6. 7.8AN 9.8AN2.1AP 8.3.1AP3, 5,6, 7,8AP3, 5,6, 7,8AP4.3, 5AP3, 5,6, 7,8AP
 
 3-2
Copyright © 2011 John Wiley & Sons, Inc. Kimmel
Accounting,
4/e Solutions Manual (For Instructor Use Only)
ASSIGNMENT CHARACTERISTICS TABLE
ProblemNumberDescriptionDifficultyLevelTimeAllotted (min.)
1AAnalyze transactions and compute net income.Moderate40502AAnalyze transactions and prepare financial statements.Moderate40503AAnalyze transactions and prepare an income statement,retained earnings statement, and balance sheet.Moderate50604AJournalize a series of transactions.Simple20305AJournalize transactions, post, and prepare a trial balance.Simple30406AJournalize transactions, post, and prepare a trial balance.Moderate40507APrepare a correct trial balance.Moderate30408AJournalize transactions, post, and prepare a trial balance.Moderate40509AAnalyze errors and their effects on the trial balance.Moderate30401BAnalyze transactions and compute net income.Moderate40502BAnalyze transactions and prepare financial statements.Moderate40503BAnalyze transactions and prepare an income statement,retained earnings statement, and balance sheet.Moderate50604BJournalize a series of transactions.Simple20305BJournalize transactions, post, and prepare a trial balance.Simple30406BJournalize transactions, post, and prepare a trial balance.Moderate40507BPrepare a correct trial balance.Moderate30408BJournalize transactions, post, and prepare a trial balance.Moderate40509BAnalyze errors and their effects on the trial balanceModerate3040
 
 
Copyright © 2011 John Wiley & Sons, Inc. Kimmel
Accounting,
4/e Solutions Manual (For Instructor Use Only)
3-3
ANSWERS TO QUESTIONS
1.
The system of collecting and processing transaction data and communicating financial informa-tion to decision makers is known as the accounting information system.
2.
Yes, a business can enter into a transaction in which only the left side of the accounting equationis affected. An example would be a transaction where an increase in one asset is offset by adecrease in another asset. An increase in the equipment account which is offset by a decrease inthe cash account is a specific example.
3.
Accounting transactions are the economic events of the company recorded by accountants becausethey affect the basic accounting equation.(a)The death of a major stockholder of the company is not an accounting transaction as it does notaffect the basic accounting equation.(b)Supplies purchased on account is an accounting transaction because it affects the basicaccounting equation.(c)An employee being fired is not an accounting transaction as it does not affect the basicaccounting equation.(d)Paying a cash dividend to stockholders is an accounting transaction as it does affect thebasic accounting equation.
4.
(a)Decrease assets and decrease stockholders’ equity.(b)Increase assets and decrease assets.(c)Increase assets and increase stockholders’ equity.(d)Decrease assets and decrease liabilities.
5.
An account consists of three parts: (a) the title, (b) the left or debit side, and (c) the right or creditside. Because the alignment of these parts resembles the letter T, it is referred to as a T account.
6.
Disagree. The terms debit and credit are synonymous with left and right, respectively.
7.
James is incorrect. The double-entry system merely records the dual (two-sided) effect of a transac-tion on the accounting equation. A transaction is not recorded twice; it is recorded once, and mustaffect two or more accounts to keep the basic accounting equation in balance. In other words, foreach transaction, debits must equal credits. 
8.
Gayle is incorrect. A debit balance only means that debit amounts exceed credit amounts in anaccount. Conversely, a credit balance only means that credit amounts are greater than debit amountsin an account. Thus, a debit or credit balance is neither favorable or unfavorable.
9.
(a)Asset accounts are increased by debits and decreased by credits.(b)Liability accounts are decreased by debits and increased by credits.(c)The common stock account is decreased by debits and increased by credits.

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