Chapter 7 - Accounting information systems . After completing this chapter, students will be able to: Explain the impact of accounting events on the accounting equation and demonstrate how to make and post journal entries, describe the impact of adjusting events on the accounting equation and demonstrate how to make and post adjusting journal entries, discuss the impact of closing events on the accounting equation and demonstrate how to make and post closing journal entries,. | Chapter 7 Accounting Information Systems Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 7- What are the 3 Characteristics of an Accounting Event? Specific to entity Business entity concept Measurable in monetary terms Monetary unit concept Impact the entity’s assets, liabilities, and/or owners’ equity Going concern concept Periodicity concept 7- What are the 9 Basic Combinations of Accounting Events? Assets increase, assets decrease Cash used to buy supplies Assets increase, liabilities increase Supplies purchases on account Assets increase, owners’ equity increase Customer billed for services received Assets decrease, liabilities decrease Supplies previously purchased on account are paid for Assets decreases; owners’ equity decrease Supplies are used in business 7- Basic Combinations Continued Liabilities increase, liabilities decrease A long-term note is used to pay off several small liabilities Liabilities increase, owners’ equity decrease A bill for utilities is received, but not paid Liabilities decrease, owners’ equity increase A customer who had previously prepaid for services, has now had those services provided Owners’ equity increase, owners’ equity decrease One type of capital stock is exchanged for another type of capital stock (this topic is covered in Chapter 13) 7- What are Debits and Credits? Debits and credits aren’t good or bad, they’re not happy or sad, rather Debit indicates “left” as in the left side of an account Credit indicates “right” as in the right side of an account So What is an Account? A place in the accounting records where the information pertaining to a particular asset, liability, or owners’ equity is maintained. An account has a DEBIT side and a CREDIT side and is often represented by a T account: 7- Debit Credit The accounting equation rule Recall: Assets = Liabilities + Owners’ equity Then, Assets are on the left; assets increase on the LEFT side of the . | Chapter 7 Accounting Information Systems Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 7- What are the 3 Characteristics of an Accounting Event? Specific to entity Business entity concept Measurable in monetary terms Monetary unit concept Impact the entity’s assets, liabilities, and/or owners’ equity Going concern concept Periodicity concept 7- What are the 9 Basic Combinations of Accounting Events? Assets increase, assets decrease Cash used to buy supplies Assets increase, liabilities increase Supplies purchases on account Assets increase, owners’ equity increase Customer billed for services received Assets decrease, liabilities decrease Supplies previously purchased on account are paid for Assets decreases; owners’ equity decrease Supplies are used in business 7- Basic Combinations Continued Liabilities increase, liabilities decrease A long-term note is used to pay off several small liabilities Liabilities increase, owners’ .
