An Accounting Information System

1. An Accounting Information System (AIS) * collects and processes transaction data and disseminates the information to interested parties. * Helps management answer such questions as: * How much and what kind of debt is outstanding? * Were sales higher this period than last? * What assets do we have? * What were our cash inflows and outflows? * Did we make a profit last period?

Basic Terminology (see Textbook for definitions) * Event * Transaction * Account * Real Account * Nominal Account * Ledger * Journal * Posting * Trial Balance * Adjusting Entries * Financial Statements * Closing Entries

2. Debits and Credits * An Account shows the effect of transactions on a given asset, liability, equity, revenue, or expense account. * Double-entry accounting system (two-sided effect). * Recording done by debiting at least one account and crediting another. * DEBITS must equal CREDITS.
AED = LRC | | | | | | | | | |
After eating dinner, lets read comics (AED=LRC)

ASSETS = LIABILITIES + EQUITY

3. Financial Statements and Ownership Structure
Income Statement:
Revenues
– Expenses Net Income (Loss)

Retained Earnings Statement (for corporations)*:
Beginning Retained Earnings
+ Net Income
-Dividends
Ending Retained Earnings
*May be included within a Statement of Stockholders’ Equity which shows the changes in all Equity accounts Balance Sheet: Assets = Liabilities and Stockholders’ Equity** Proprietorship or Partnership | | Corporation | * Capital Account * Drawings Account | | * Common Stock * Additional Paid-in Capital (APIC) * Retained Earnings |

** Stockholders’ Equity accounts depend upon the ownership structure of the entity

4. The Accounting Cycle
a. Analyze transactions
b. Record in journal
c. Post to ledger (T-accts)
d. Trial Balance