Debit Credit Systems

1. Chapter 3: The Accounting Information Systems Intermediate Accounting, 11th ed. Kieso, Weygandt, and Warfield Prepared by Jep Robertson New Mexico State University

6. The Double Entry System The system records the two-sided effect of transactions Transaction Two-sided effect Bought furniture for cash Decrease in one asset Increase in another asset Took a loan in cash Increase in an asset Increase in a liability

7. The Double Entry System Note that the accounting equation equality is maintained after recording each transaction.

8. The Account and the Debit-Credit Convention Asset Expense Debit Debit Revenue Liability Equity Credit Credit Credit Normal balance in account

9. Expanded Basic Equation and Debit/Credit Rules and Effects

11. Ownership (Equity) Structure Owners’ Equity Net Income Investments by Owners + Net Loss Dividends or Withdrawals -

13. The Accounting Cycle: Steps End Adjusting Journal Entries Financial Statements Closing Entries Start over 7 6 5 8 Adjusted Trial Balance Post-Closing Trial Balance 9 Begin Accounting period Unadjusted Trial Balance 4 Originating Journal Entries 2 Post to Ledger 3

15. Adjusting Entries: Recognizing Revenue Adjusting Unearned Revenue Recording Accrued Revenue Revenues received in cash and recorded as liabilities Revenues earned but not yet recorded in books

16. Adjusting Entries: Matching Expenses Adjusting Prepayments for Expenses Recording Accrued Expense Prepayments made in cash and recorded as assets Expense incurred but not yet recorded in books

18. Scheme of Closing Entries Dividends 4 Ret. Earnings Revenue 2 Income Summary Expense 1 3

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