Chapter 4 Adjustments, Financial Statements, and Financial Results_Sakai.pptx - Introduction to Financial Accounting Chapter 4 Adjustments Financial

Chapter 4 Adjustments, Financial Statements, and Financial Results_Sakai.pptx

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Introduction to Financial Accounting Chapter 4 Adjustments, Financial Statements, and Financial Results
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LEARNING OBJECTIVES Explain why adjustments are needed Prepare adjustments needed at the end of the period Prepare an adjusted trial balance Prepare financial statements Explain the closing process Explain how adjustments affect financial results
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Activities Activities Receipt/ Payment Receipt/Payme nt Receipt/ Payment e.g. A flight ticket sold for $2,000 in July e.g. the customer travels in August Deferral Adjustment Accrual Adjustment WHY ADJUSTMENTS ARE NEEDED? Current Period Current Period e.g. the company used $1,000 utilities e.g. billed and paid for utilities
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Update information that has been recorded Examples: Inventories Cost of Goods Sold Supplies Supplies Expense Prepaid Rent Rent Expense Unearned Revenue Sales Revenue Income Statement Balance Sheet PREPARE ADJUSTING ENTRIES Deferral Adjustments
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Dr. Amortization Expense Cr. Accumulated Amortization Amortization is the process of allocating the cost of property and equipment to the accounting periods in which they are used to generate revenues. A contra-account is an account that is an offset to, or reduction of, another account. Contra-Asset Account Equipment 15000 Less: Accumulated Amortization (3000) Equipment, Net 12000 PREPARE ADJUSTING ENTRIES Deferral Adjustments
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PREPARE ADJUSTING ENTRIES Report complete information
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