510chapter3fall2009afterclass9152009

510chapter3fall2009afterclass9152009 -...

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Chapter 3:  The Accounting  Information System
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What’s Important Basic accounting terminology Identification and recording of journal  entries Preparation of trial balances  Adjusting journal entries  Closing entries
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Payment of cash that is recorded as an asset because  service or benefit  will be received in the future. Adjusting Entries for “Prepaid  Adjusting Entries for “Prepaid  Expenses” Expenses” insurance insurance supplies supplies advertising advertising Cash Payment Expense Recorded BEFORE rent rent maintenance on equipment maintenance on equipment fixed assets fixed assets Prepayments often occur in regard to Prepayments often occur in regard to : :
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Supplies. Supplies. Pioneer purchased advertising supplies costing $25,000 on October 5.  Prepare the journal entry to record the purchase of the  supplies. Cash 25,000 Advertising supplies 25,000 Oct. 5 Debit Credit Advertising Supplies 25,000 25,000 25,000 25,000 Debit Credit Cash Adjusting Entries for “Prepaid  Adjusting Entries for “Prepaid  Expenses Expenses
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Supplies. An inventory count at the close of business on October 31 reveals  that $10,000 of the advertising supplies are still on hand. Advertising supplies 15,000 Advertising supplies expense 15,000 Oct. 31 Debit Credit Advertising Supplies 25,000 25,000 15,000 15,000 Debit Credit Advertising Supplies Expense 15,000 15,000 Adjusting Entries for “Prepaid  Adjusting Entries for “Prepaid  Expenses” Expenses” 10,000 10,000
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Statement Presentation: Advertising supplies  identifies that portion  of the asset’s cost that  will provide future  economic benefit. Adjusting Entries for “Prepaid  Adjusting Entries for “Prepaid  Expenses” Expenses”
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Statement Presentation: Advertising expense  identifies that portion  of the asset’s cost that expired in October. Adjusting Entries for “Prepaid  Adjusting Entries for “Prepaid  Expenses” Expenses”
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Insurance. On Oct. 4 th , Pioneer paid $6,000 for a one-year fire insurance  policy, beginning October 1.  Show the entry to record the purchase of the  insurance.   Cash 6,000 Prepaid insurance 6,000 Oct. 4 Debit Credit Prepaid Insurance 6,000 6,000 6,000 6,000 Debit Credit Cash Adjusting Entries for “Prepaid  Adjusting Entries for “Prepaid  Expenses” Expenses”
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Insurance. An analysis of the policy reveals that $500 ($6,000 / 12) of  insurance expires each month.  Thus, Pioneer makes the following adjusting  entry. Prepaid insurance
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This note was uploaded on 12/29/2009 for the course ACC 5100 taught by Professor Andrews during the Fall '09 term at Wayne State University.

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510chapter3fall2009afterclass9152009 -...

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