ACG2021 Ch 4 Notes - Unadjusted Trial Balance a list of...

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Unadjusted Trial Balance – a list of individual accounts and their debit or credit balances. The unadjusted trial balance, by definition, does not include any year- end adjusting revenue/expense entries or accounts Adjusted Trial Balance – Presents the account balances at year-end after booking year-end adjusting revenue/expense entries. At the year-end (12/31), many revenue and expense entries need to be booked as a result of operations that occur throughout the year. Typically, these entries relate to accrued expenses and deferred revenues. Post-Closing Trial Balance – Presents final account balances after closing all revenue and expense accounts to Retained Earnings After these entries are booked, all of the revenues and expenses are closed to retained earnings, resulting in either a net increase (net income) in Retained Earnings or a net decrease (net loss) in Retained Earnings. Additionally, if dividends are declared or paid, the reduction in retained earnings is also factored in. CLOSING THE ENTRIES – Debit revenues, credit expenses, credit dividends payable (if dividends are declared), and the “plug” will be to retained earnings. Keep in mind, this could be a credit or a debit to Retained Earnings, and this depends on if there is a net income or net loss. Assuming a net income: Revenues XXX Expenses XXX Dividends Payable (if applicable) XXX Retained Earnings XXX Assuming a net loss: Revenues XXX Retained Earnings XXX Expenses XXX Dividends Payable (if applicable) XXX
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*Remember, when we INITIALLY record revenues and expenses, we debited expenses and credited revenues. When we CLOSE these accounts, we do the opposite (as illustrated above) The Three Scenarios for Recognizing Revenues (Review from Ch 3) 1. Cash is received BEFORE the company delivers goods or services –
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ACG2021 Ch 4 Notes - Unadjusted Trial Balance a list of...

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