chapter 4

chapter 4 - John Rubinetti Professor Kravet 10/5/07 Chapter...

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Unformatted text preview: John Rubinetti Professor Kravet 10/5/07 Chapter 4 7. Accruals and Prepayments are the two adjusting categories. Prepayments are either prepaid expenses or unearned revenues, and when companies make these adjustments for prepayments they use the statement date to record the portion that represents expenses incurred or revenue earned in that accounting period. Prepaid expenses are costs that are used up with the passage of time or through use. Some examples of prepayments are advertising, insurance, rent, supplies and equipment. These are recorded in the financial statements when the payments are due, not all at once, adjusting entries to record expenses applicable to the current accounting period and to show the remaining amounts in the asset accounts. Depreciation is also a prepaid expense. Depreciation is defined as the process of allocating the cost of an asset to expense over its useful life. This is due to the fact that some of the assets the company holds will eventually lose their value, such as buildings,...
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This note was uploaded on 04/29/2008 for the course AC 11 taught by Professor Kravet during the Fall '07 term at Fairfield.

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