Lect4 - Adjustments,FinancialStatements...

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Adjustments, Financial Statements and the Quality of Earnings John Dickhaut
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Learning Objectives The Accounting Cycle Adjusting Entries Closing Process Net Profit Margin Ratio
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Accounting Cycle Records individual transactions Produces the four basic financial statements Gets the general ledger (i.e., T accounts) ready for the next accounting period
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Accounting Cycle Steps Record journal entries from transactions Post journal entries to the general ledger Prepare unadjusted trial balance Adjust the accounts Prepare an adjusted trial balance Prepare the financial statements Close the temporary accounts Prepare a post-closing trial balance
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1.Record Journal Entries As financial transactions occur, the effect is recorded in a journal A chronological record of every transaction of an accounting period Gives amounts and accounts affected by each transaction
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2. Posting Information is transferred from the individual journal entries to the separate accounts in the general ledger After all journal entries are posted, can calculate the balance of any account by summing the debits and credits
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3. The Unadjusted Trial Balance A listing of individual accounts with each account’s debit or credit balance usually in financial statement order. Ending debit or credit balances are listed in two separate columns Total debit account balances should = total credit account balances.
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total debits = total credits Not yet including this period NI
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The Unadjusted Trial Balance If total debits do not do not equal total credits on the trial balance, errors have occurred . . . in preparing balanced journal entries. in posting the correct dollar effects of a transaction. in copying ending balances from the ledger to the trial balance.
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4. Adjusting Entries Adjusting entries recorded to make sure all accounts are properly stated and nothing has been omitted Adjustments made for Errors Accruals and deferrals
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Adjusting Entries There are two types of adjusting entries.
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This note was uploaded on 09/18/2008 for the course ACCT 2050 taught by Professor Sanjay during the Spring '08 term at Minnesota.

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Lect4 - Adjustments,FinancialStatements...

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