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Accounting
Information
System
UAA ACCT 201
Principles of Financial
Accounting
Dr. Fred Barbee
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Topic L !ead "#
$enerall% Accepted
Accounting Principles
C1& C2 '()*1 +,1& -1
Transactions&
Docu.ents& and t/e
Accounting -0uation
C'&
C*& C1
*1)*2
+,2&
+,'
Transaction Anal%sis
and t/e Accounting
-0uation
A1 *2)12 -'
Chapter 2 - Day 1 - Agenda
derstanding
tastic
ancial

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Learning Accounting
If you want to learn
accounting, you learn it one
concept at a time, one
principle at a time.

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Accounting
Information
System
Te3t ,ection4
$enerall% Accepted
Accounting Principles 5p. '(6
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Learning
Objective
!plain the financial
reporting environment
C1
Conceptual
perating -n7iron.ent
T/e Accounting ,%ste.4
A Conceptual 7er7ie8
Business -ntit% A
Process and
,u..ari9e
,%ste. utputs4
Financial
,tate.ents
and !eports
,%ste. :nputs4
;easurable
Transactions
and -7ents
-ntit% B -ntit% C
-ntit% D -ntit% -
Preparers
ASB
Auditors
Decision makers
GAAP
"inancial #eporting nvironment
Financial
Statements
Audit
Report
FASB
GAAS
Management
Users
Income Statement
Balance Sheet
Statement of
Cash Flows
Management
Prepares
Auditors
Basic
Mistrust
Lends
Credibility
Independent
Auditor
1
2
3
4
G
A
A
P
G
A
A
S
International Accounting $rinciples
%espite our growing global economy,
countries continue to maintain their
uni&ue set of acceptable accounting
practices.

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Learning
Objective
I'entify, e!plain, an' apply
accounting principles.
C2
Conceptual
A business is
accounted for
separatel% fro. its
o8ner5s6.
Financial ,tate.ent
infor.ation is
supported b%
independent&
unbiased e7idence.
A business
continues operation
instead of being
closed or sold.
-3press
transactions and
e7ents in .onetar%
units.
Financial state.ents are based on
actual costs incurred in business
transactions.

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Accounting
Information
System
Te3t ,ection4
Transactions&
Docu.ents& and Accounts 5p.
*16
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Learning
Objective
I'entify, e!plain, an' apply
accounting principles.
C'
Conceptual
Source
documents
Recording &
posting
Trial balance
Reporting
Transaction
or event
Analysis
(he Accounting $rocess
Exh.
2.2
Eternal Transactions
occur bet!een t"e
organi#ation and an
outside party$
%nternal Transactions
occur !it"in t"e
organi#ation$
(ransactions an' vents
!changes of economic consi'eration
between two parties.
Ongoing
events in
orld
Recording
Data
Bank
Classifying nfor!ation
Accounting :nfor.ation ,%ste.
Boundar%

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Learning
Objective
%escribe source 'ocuments
an' their purpose.
C*
Conceptual
Source %ocuments
:n7oices
t/er
C/ec<
,tubs
)ournal
*an+ Statement

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Learning
Objective
%escribe an account an'
its uses in recor'ing
transactions.
C1
Conceptual

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Account
A storage unit use' to classify an'
summari,e money measurements of
business activity of a similar nature.

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Detailed record o& increases
and decreases in speci&ic
assets' liabilities' e(uities'
revenues' or epenses$
)))))))))))))))))))))))
Separate accounts are maintained &or
eac" item o& importance$
(he Account
Accts Rec.
Accts Rec.
!"e #eneral
Ledger
#eneral
Ledger
Inventory
Inventory
Cash
Cash
Notes ay.
Notes ay.
Mortgage
Mortgage
Accts ay.
Accts ay.
Revenue
Revenue
!"#enses
!"#enses
Retained
!arnings
Retained
!arnings
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Account Title
Left ,ide
!ig/t ,ide

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(he "ormal
Account
(he *alance Column
Le'ger
Account Title
Account =o. >>>
Date :te.
Post
!ef Debit Credit
Balance
Debit Credit

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Accounting
Information
System
Te3t ,ection4
Transactional Anal%sis
and t/e Accounting -0uation
5p. *26
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Learning
Objective
Analy,e business
transactions using the
accounting e&uation.
A1
Analytical
Assets Liabilities
8ners?
-0uit%
Capital
,toc<
!etained
-arnings
-3penses !e7enue
@ A
=et
:nco.e
)
@
T/e
Accounting
-0uation
A @ L A -

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Analy,ing (ransactions
-. Analy,e the transaction an' its
source.
2. I'entify the impact of the
transaction on account balances.
.. I'entify the financial
statements that are impacte'
by the transaction.

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(ransaction Analysis /
$art - 0(e!t p. 123
On %ecember -, Chuc+ (aylor forms
an athletic shoe consulting business.
4e sets it up as a corporation. (aylor
owns an' manages the business. (he
mar+eting plan for the business is to
focus primarily on consulting with
sports clubs, amateur athletes an'
others who place or'ers for athletic
shoes with manufacturers.

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(ransaction Analysis /
$art - 0(e!t p. 123
(aylor personally invests 5.6,666
cash in the new company in e!change
for common stoc+, an' 'eposits the
cash in a ban+ account opene' un'er
the name of "ast"orwar', Inc.

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(ransaction Analysis /
$art II 0(e!t p. 763
(o illustrate how revenue recognition
wor+s, let8s return to "ast"orwar'8s
transactions.

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*"uck Taylor invests +,-'--- in t"e
company in ec"ange &or common
stock$
-

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FastFor!ard purc"ases +.'/-- o&
supplies &or cas"$
2

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FastFor!ard spends +.0'--- to
ac(uire e(uipment &or testing
at"letic s"oes$
.

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FastFor!ard purc"ased +1'2-- o&
supplies on credit$
1

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FastFor!ard provides consulting
services to an at"letic club and
collects +3'.-- in cas"$
7

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FastFor!ard pays +2'--- rent to t"e
landlord o& t"e building !"ere its
store is located$
9

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FastFor!ard pays t"e bi!eekly
+1-- salary o& t"e company4s only
employee$
2

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#evenue #ecognition $rinciple
-. #evenue is recogni,e' when earne'.
2. Assets receive' from selling
pro'ucts an' services nee' not be in
cash.
.. #evenue recogni,e' is measure' by
the cash receive' plus the cash
e&uivalent 0mar+et3 value of any
other assets receive'.
FastFor!ard provides consulting
services o& +2'0-- and rents its test
&acilities &or +,--$
:
T"e client in transaction 5 pays +2'6--
to FastFor!ard 2- days a&ter it is
billed &or consulting services$
;
FastFor!ard pays +6-- to *alTec"
Supply as partial payment &or its
earlier +1'2-- purc"ase o& supplies$
-6
FastFor!ard declares and pays a
+0-- cas" dividend to its o!ner$
--
Cas/
0-3 .6,666
073 1,266
0;3 -,;66
.9,-66
<.-,266
1,166
023 2,766
0.3 29,666
093 -,666
023 266
0-63 ;66
0--3 966
.-,266
Increases
%ecreases
*alance %ecreases
Cas/
Account =o. 101
Date :te. P! Debit Credit
Balance
Debit Credit
516 '0&000 '0&000
526 2&100 2B&100
5'6 22&000 1&100
516 *&200 1&B00
526 1&000 *&B00
5B6 B00 *&000
5C6 1&C00 1&C00
5106 C00 1&000
5116 200 *&*00
$One must learn by
doing t"e t"ing%
t"oug" you t"in&
you &no it' you
"ave no certainty
until you try it()
P"#lili"s Syr"s$
%oral Sayings