Professional Documents
Culture Documents
The Mechanics of
Accounting
Learning Objective 1
Understand the
process of
transforming
transaction data into
useful accounting
information.
What Are the Different Exchange
Transactions?
Borrow and
invest money.
Purchase land,
Buy and sell buildings, and
goods or equipment.
services.
Exchange
Transactions
Pay wages to Pay taxes to the
employees. government.
Distribute
earnings to
owners.
Business Documents
Examples: Sales invoice, purchase order,
check stub.
Business documents are used
to confirm that an arm’s-length transaction
has occurred.
to establish the amounts
to be recorded.
to facilitate the analysis
of business events.
These documents must be
analyzed.
What is the Sequence of the
Accounting Cycle?
Step 1 Analyze transactions.
3
Summarize the effects of transactions.
Step 1. Posting journal entries.
2. Preparing a trial balance.
4
Prepare reports.
Step 1. Adjusting entries.
2. Preparing financial statements.
3. Closing the books.
Learning Objective 2
Analyze transactions
and determine how
those transactions
affect the accounting
equation (step one
of the accounting
cycle).
Step 1: Analyze Transactions
Invest in company
Purchase
equipment
Borrow funds to
settle a debt
What Is the Rule of Double-Entry
Accounting?
Debit Credit
Using a T-Account
35 12
23
Debits and Credits
Remember:
DR CR DR CR DR CR
(+) (-) (-) (+) (-) (+)
Journal --
book of
original entry
Step 2: Record Transactions
Summarize
the resulting
journal entries
through
posting and
prepare a trial
balance (step
three of the
accounting
cycle).
Step 3: Posting Journal Entries and
Preparing a Trial Balance
Define the Following Terms
Posting
transferring amounts from the journal to the ledger.
Ledger
a book of accounts where journal transactions are posted
and thereby summarized.
Posting reference
a cross-reference number between the general journal and
the accounts in the general ledger.
Chart of accounts
a systematic listing of all accounts used by a company.
General Ledger
A listing of all
account balances;
provides a means to
assure that debits
What is the Trial Balance equal credits.
used for?
Describe how
technology has
affected the first
three steps of the
accounting cycle.
Advantages of Computers
Large amounts of
information can be quickly
processed without
mathematical errors.
More documents can be
produced than humanly
possible in the same
amount of time.
Common tasks can be
automated for increased
efficiency.
Disadvantages of Computers