8-27 Accounting Cycle

8-27 Accounting Cycle - Dont need cash to have revenue At...

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Accounting Cycle: 1. Something happens (transaction) 2. Analyze transaction a. do we have something we can record, b. what are the accts involved, c. do we have something really going on here 3. Record Journal Entry 4. Post to general ledger 5. prepare trial balance a. make sure debits equals credits 6. Adjusting Entries 7. Adjusted trial balance 8. Financial Statements 9. Closing a. Close at the end of fiscal year b. We close so we can get temp. balances back to zero i. Income statement accounts 1. Rev, exp, gains and losses 10. Post closing trial balance a. Balance sheet accounts 11. Reversing Entries (if they chose to do them) a. Dated the First day of the next period b. You reverse: i. Accruals ii. Adjusting journal entries for deferrals that create an asset account as part of adjustment, or create liability account as part of adjustment, and you know it’s adjustment for deferral Accruals Recognize revenue when you deliver product or service to customer
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Unformatted text preview: Dont need cash to have revenue At end of the month you ask: Have I recorded all my revenue? Accruals happen when recognition precedes cash flow Accrual always has a receivable or payable involved Not every company reverses, but we always reverse accruals Recognition comes first in an accrual Deferral Putting off recognition, until weve earned the revenue or incurred the expense Prepaid insurance o Date: 9/1 o Dr prepaid insurance 1200 o Cr Cash 1200 o insurance is consumed by the passing of time o Date 12/31 o Cr Prepaid insurance 400 o dr insurance expense 400 o Another way to do it: o Date: 9/1 o Dr insurance exp 1200 o Cr Cash 1200 o adjustment o date 12/31 o dr prepaid insurance 800 o cr insurance expense 800 to do adjusting journal entries you have to: where you currently are Where you should be...
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8-27 Accounting Cycle - Dont need cash to have revenue At...

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