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Lecture Principles of accounting (2005): Chapter 2 - Needles, Powers, Crosson

Chapter 2 - Measuring business transactions. Chapter 2 continues the exploration of accounting measurement by focusing on the problems of recognition, valuation, and classification and how they are solved in the measuring and recording of business transactions. | Measuring Business Transactions Multimedia Slides by: Gail A. Mestas, MAcc, New Mexico State University Chapter 2 Learning Objectives Explain, in simple terms, the generally accepted ways of solving the measurement issues of recognition, valuation, and classification. Describe the chart of accounts and recognize commonly used accounts. Define double-entry system and state the rules for double entry. Learning Objectives (cont’d) Apply the steps for transaction analysis and processing to simple transactions. Prepare a trial balance and describe its value and limitations. Record transactions in the general journal and post transactions from the general journal to the ledger. Measurement Issues Objective 1 Explain, in simple terms, the generally accepted ways of solving the measurement issues of recognition, valuation, and classification Measuring Business Transactions Once accountants have determined a transaction has occurred (discussed in Chapter 1), they must decide When the . | Measuring Business Transactions Multimedia Slides by: Gail A. Mestas, MAcc, New Mexico State University Chapter 2 Learning Objectives Explain, in simple terms, the generally accepted ways of solving the measurement issues of recognition, valuation, and classification. Describe the chart of accounts and recognize commonly used accounts. Define double-entry system and state the rules for double entry. Learning Objectives (cont’d) Apply the steps for transaction analysis and processing to simple transactions. Prepare a trial balance and describe its value and limitations. Record transactions in the general journal and post transactions from the general journal to the ledger. Measurement Issues Objective 1 Explain, in simple terms, the generally accepted ways of solving the measurement issues of recognition, valuation, and classification Measuring Business Transactions Once accountants have determined a transaction has occurred (discussed in Chapter 1), they must decide When the transaction occurred The recognition issue What value to place on the transaction The valuation issue How to categorize the components of the transaction The classification issue Measurement Issues Recognition issue Valuation issue Classification issue These issues underlie almost every major decision in financial accounting Controversies exist; solutions are not cut and dried The Recognition Issue Recognition means the recording of a transaction Refers to the difficulty of deciding when a business transaction occurred Point of recognition is important because it affects the financial statements Point of Recognition for Sales and Purchases Sales and purchases of products Usually recognized when title of property transfers Or, may set up a recognition point Predetermined time at which a transaction should be recorded Sales and purchases of services Usually recognized when services have been performed If services are performed over a long period of time, may set up billing at specific points of .