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Adjusting Entries[1]

Adjusting Entries[1] - Examples Airline Tickets Annual Dues...

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Adjusting Entries Accounting Principles Matching Principle – Matching expenses incurred with revenues earned Accrual Accounting - In accordance with generally accepted accounting principles - GAAP Types of Adjusting Entries Prepayments Prepaid Expenses Expenses paid in advance – recorded as assets until used or consumed Examples: Supplies, Prepaid Insurance, Maintenance Contracts, Subscriptions, Equipment RULE: DEBIT EXPENSE, CREDIT ASSET OR CONTRA-ASSET Unearned Revenues Cash received in advance – recorded as liability until earned
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Unformatted text preview: Examples: Airline Tickets, Annual Dues, Subscriptions RULE: CREDIT REVENUE, DEBIT LIABILITY Accruals Accrued Expenses Expenses incurred – not yet paid nor recorded Examples: Utility bills, salaries, products received but not yet invoiced nor paid RULE: DEBIT EXPENSE, CREDIT PAYABLE Accrued Revenues Revenues earned – not yet paid nor recorded Examples: On account sales, sales not yet paid for RULE: CREDIT REVENUE, DEBIT RECEIVABLE Reference: Financial Accounting, 5 th Edition, Weygandt, Keyso and Kimmel...
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