Chapter 3 - Accounting Information System

Accounting Information System

system of collecting and processing transaction data and communicating financial information to decision-makers

Accounting Cycle

basis of an accounting information system and implemented through a computerized system called electronic data processing systems

Accounting Transactions

economic events that require recording in financial statements

Analyzing Transactions

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

Tabular Analysis

used to demonstrate effect that each transaction has on particular financial statements

On Account

means that services will be paid at a later date

Summary of Transactions

summarizes transactions to show their cumulative effect on the basic accounting equation

Debits and Credits

describes where entries are made in accounts

Debiting

entering an amount on the left side

Crediting

entering an amount on the right side

Benefits of Using T-Accounts

• Reduces recording errors by having increases on one side and decreases on the other

• Helps in determining the totals of each side of the account as well as the account balance

Double-Entry System

• Requires two-sided effect of each transaction recorded in appropriate accounts

• Provides a logical method for recording transactions

• Helps ensure accuracy of recorded amounts

• Helps detect errors