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Accounting - Chapter 2 Notes

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LEARNING OBJECTIVES CONCEPTUAL 1. C1Explain the steps in processing transactions and the role of source documents. 2. C2Describe an account and its use in recording transactions. 3. C3Describe a l ... edger and a chart of accounts. 4. C4Define debits and credits and explain double-entry accounting. ANALYTICAL 1. A1Analyze the impact of transactions on accounts and financial statements. 2. A2Compute the debt ratio and describe its use in analyzing financial condition. PROCEDURAL 1. P1Record transactions in a journal and post entries to a ledger. 2. P2Prepare and explain the use of a trial balance. 3. P3Prepare financial statements from business transactions. SYSTEM OF ACCOUNTS C1 Explain the steps in processing transactions and the role of source documents. Business transactions and events are the starting points of financial statements. The process to get from transactions and events to financial statements includes the following:  Identify each transaction and event from source documents.  Analyze each transaction and event using the accounting equation.  Record relevant transactions and events in a journal.  Post journal information to ledger accounts.  Prepare and analyze the trial balance and financial statements. Source Documents Source documents identify and describe transactions and events entering the accounting system. They can be in either hard copy or electronic form. Examples are sales tickets, checks, purchase orders, bills from suppliers, employee earnings records, and bank statements. For example, cash registers record information for each sale on a tape or electronic file locked inside the register. This record is a source document for recording sales in the accounting records. Source documents are objective and reliable evidence about transactions and events and their amounts. [Show More]

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