Chapter 4 - DAmore-McKim School of Business The Accounting Cycle DAmore-McKim School of Business Purpose of Adjustments Revenuesare recordedwhen earned

Chapter 4 - DAmore-McKim School of Business The Accounting...

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D’Amore-McKim School of Business The Accounting Cycle
D’Amore-McKim School of Business Purpose of Adjustments Revenues are  recorded when  earned. Expenses are  recorded when  incurred. Adjustments are required at the end of each fiscal period to get the revenues and expenses into the “right” period when: Transactions occur over time Revenue/expense recognition does not occur at the same time as cash receipts/disbursements Matching Principle
D’Amore-McKim School of Business Types of Adjustments
D’Amore-McKim School of Business Types of Adjustments
D’Amore-McKim School of Business Transaction Process Overview 4-5 Inception Account for the transaction (if one took place) Either revenue earned/expense incurred or cash paid/received Adjusting Entry Compute the amount of revenue earned or expense incurred for the period Prepare the adjusting entry Conclusion Account for the transaction (generally, the opposite of inception) Either cash paid/received or revenue earned/expense incurred
D’Amore-McKim School of Business Adjusting Entry Summary

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