This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Acct 101 L12, L13, L16 Handout #04 1 Adjusting Process and Accounting Cycle ! Adjusting entries: are made at the end of a period to update balance sheet and income statement accounts. ! The reason for doing adjusting entries is based on: • Time period concept • Revenue recognition principle • Matching principle ! Typical adjusting entries: • Accrued revenues/ expenses • Deferred revenues/ expenses ! E4&6 a. Deferred expense -- cash paid before expense is incurred. b. Accrued expense -- expense incurred before cash is paid. Acct 101 L12, L13, L16 Handout #04 2 c. Deferred revenue -- cash received before revenue is earned. d. Accrued revenue -- revenue earned before cash is collected. e. Deferred expense -- cash paid for equipment before being used. f. Deferred expense -- cash paid before expense is incurred. g. Accrued revenue -- revenue earned before cash is received. Additional question : If the company recorded the full amount of insurance as insurance expense on July 1 and forgot to record adjusting entry, what is the effect of this error on balance sheet and income statement accounts? ! The accounting cycle: • Create a chart of accounts • Record transactions as journal entries into a general journal • Post the transactions from a general journal into a general ledger/ T-accounts...
View Full Document