transaction processing narrative
day to day exchanges, capture everything in day to day that we need
cycle approach
group of similar transactions that go together for processing
–> efficiency
transaction documents
evidence of a transaction, initiates the start of the accounting process
source document
up front @ beginning, starts a process
product document
@ the end of something
ex paycheck
turnaround document
product doc to one person, becomes source doc to another person (invoice)
timeliness
faster doc prepared the more reliable
internal doc
circulated only inside entity
external doc
some process of prep done by outside party
–> deemed more reliable
journal
original book of entry (chronological)
special journal
only 1 type of transaction gets posted
posting to ledger
running account balance
1) general
2) subsidiary
subsidiary
(AR, AP, wages pay, PPE)
multiple T-accounts needed for AR because there are multiple customers
all sub ledgers need to total to control total
trial balance
credits = debits
can be done @ any time
A
L
E
Rev
Exp
- if balance there could still be issues
5 issues that can occur which trial balance doesnt capture
- swap debits and credits
- mix up accounts
- mix up the numbers
- forget to record
- record it twice
adjustement entries
fixing stuff
financial statements
cut and paste based on GAAP
closing entries
1) resets temp accounts to 0
2) take income –> RE
closing entries
rev XX
income summary XX
income summary XX
exp XX
income summary XX
RE XX
*div gets debited straight to RE
RE - credit norm balance
debit = DIV
credit = NI
post closing trial balance
not necessary, but only has perm accounts
controls are a…
responsibility of management
subsystems interrelated
breakdown in one system can break mess up everything
properly designed documents are a …
control
- multi copy docs
- have to be easily understood
- timely prepared
- prenumbered docs (invoices)
reconsiling
independent checks on performance/ verification
