Chapter 4 Summary

Chapter 4 Summary - Chapter 4 1) Explain the goals...

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Chapter 4 1) Explain the goals accomplished by recording adjustments a) Adjustments are recorded for two primary reasons: i) Make the financial statements up to date by updating previously recorded (“deferred”) assets and liabilities, along with their corresponding expense and revenue accounts ii) Make the financial statements complete by including (“accruing”) assets and liabilities not previously recorded, along with their corresponding revenue and expense accounts. 2) Prepare adjustments needed at the end of the period a) The three-step process for preparing adjustments includes i) Identify the unadjusted balances in the pair of balance sheet and income statement accounts to be adjusted ii) Calculate the amount of the adjustment needed, using a timeline where appropriate iii) Prepare an adjusting journal entry to make the adjustment. b) Adjusting journal never affect the Cash accounts 3) Explain how adjustments affect information quality a) Research shows that, overall, adjustments significantly improve the quality of financial statements, allowing financial statement users to better evaluate past decisions and predict future financial results. 4) Prepare an adjusted trial balance a) An adjusted trial balance is a list of all accounts with their adjusted debit or credit balances indicated in the appropriate column to provide a check on the equality of the debits and credits. 5)
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This note was uploaded on 04/14/2008 for the course ACC 2361 taught by Professor Steverson during the Spring '08 term at Texas State.

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Chapter 4 Summary - Chapter 4 1) Explain the goals...

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