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ACCT101-Handout04 - Acct 101 L12 L13 L16 Handout#04...

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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.
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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?
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