Chapter 2

Basic Accounting Concepts

Learning Objectives
After studying this chapter, you should be able to…
 Describe the basic elements of a financial accounting
system.
 Analyze, record, and summarize transactions for a
corporation’s first period of operations.
 Prepare financial statements for a corporation’s first
period of operations.
 Analyze, record, and summarize transactions for a
corporation’s second period of operations.
 Prepare financial statements for a corporation’s
second period of operations.
Learning Objective 1

Describe the basic elements of a

financial accounting system
 Basic Rules of an Accounting System

Rules determine:

AMOUNT
WHAT WHEN HOW
of the
transactions transactions transactions
transaction
are to be are to be are to be
to be
recorded recorded recorded
recorded

• A transaction is an economic event that can affect one, two or

more items in the financial statements.
Framework of an Accounting System

The Accounting Equation

Assets = Liabilities + Equity

Integrated Financial Statement Framework: Template

• By expanding the accounting equation, transactions can be

analyzed, summarized, and recorded within the integrated
financial statement framework.