Accounting Chapter 3

The system of collecting and processing transaction data and communicating financial information

The type of economic events that need to be recognized or recorded are called accounting transactions.

Assets = liabilities + Stockholders equity

Is the process of identifying the specific effects of economic events on the accounting equation.

Revenues - Expenses - Dividends

Liabiltiy

Stock holder Equity

Asset

Asset

Liability

Cash payment for work that has yet to be completed.

Therefore a payment of $ 1,200 for a website to be built is a credit to unearned service revenue as well as a $ 1,200 credit to cash.

Go under both Assets and Stock holders Equity because Revenue increases Stockholders Equity.

For example: If a company receives a 10,000 check for services, the 10,000 would be credit in the Cash section under Assets

and

the 10,000 would also be credited in the revenue section under the retained earnings section which is under Stock Holders Equity.

asset

Rent is an expense incurred by Sierra Corporation in its effort to generate revenues. Expense decreases Stock holders equity & Cash.

For example: ABURA Enterprise pays 900 in rent on the analysis sheet we would Credit Cash and Debit expenses - under retained earnings which is under stock holders equity-.

When a company purchases an insurance policy   that will affect the company for more then one billing period these are unidentified as  Prepaid under assets

for example: if a company paid 600 dollars for a one year insurance policy then cash would be credited 600 and prepaid insurance would be debited by 600 dollars.