Guidelines for preparing financial Statements–READ AND DO:
- Standard formats should be used.
- Headings should be used on all statements.
- Single underline should be used to add or subtract numbers above the line; double underlines indicate a total.
- Dollar signs are used at the top of columns and beneath single (subtotal) underlines.
- Expenses may be listed from highest to lowest dollar amount.
- Assets are listed from most liquid to least liquid.
- Liabilities are listed from most current to the least current.
Analyzing Transactions: The Accounting Equation
- LO1 Define the accounting elements.
- LO2 Construct the accounting equation.
- LO3 Analyze business transactions.
- LO4 Show the effects of business transactions on the accounting equation.
- LO5 Prepare and describe the purposes of a simple income statement, statement of owner’s equity, and balance sheet.
- LO6 Define the three basic phases of the accounting process.
Overview of the Accounting Process (See Figure 2-4) & WATCH THIS VIDEO
- Input. Business transactions provide the necessary information for input.
- Processing. Identifying, classifying, and determining how accounts are increased or decreased in business transactions.
- Output. Recording the processed information on financial statements.
- In-Class Exercise: Complete Exercises E2-5A with a partner. We will check them together.
- Homework: Study Guide Review Questions 16, 17, 18, 19; Study Guide Exercises 3, 9, 10, 11; Study Guide Problems 14, 15, 16, 17