Financial Accounting: Tools for Business Decision Making, 7th Edition

CHAPTER 3

THE ACCOUNTING INFORMATION SYSTEM

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

1. Analyze the effect of business transactions on the basic accounting equation.
2. Explain what an account is and how it helps in the recording process.
3. Define debits and credits and explain how they are used to record business transactions.
4. Identify the basic steps in the recording process.
5. Explain what a journal is and how it helps in the recording process.
6. Explain what a ledger is and how it helps in the recording process.
7. Explain what posting is and how it helps in the recording process.
8. Explain the purposes of a trial balance.
9. Classify cash activities as operating, investing, or financing.

Feature-Story

ACCIDENTS HAPPEN

How organized are you financially? Take a short quiz. Answer yes or no to each question:

• Does your wallet contain so many cash machine receipts that you've been declared a walking fire hazard?
• Is your wallet such a mess that it is often faster to fish for money in the crack of your car seat than to dig around in your wallet?
• Was Aaron Rodgers ...