Class 9_14 & 15_10 - Ch 4

Class 9_14 & 15_10 - Ch 4 - Agenda Questions? Close out...

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Page 1 Questions? Close out income statement from last class example and create Balance Sheet Textbook – Chapter 4 Agenda
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Page 2 Adjusting Revenues and Expenses We book transactions during the period that result from exchanges between the company and other parties (internal and external) Recorded in the accounting system via journal entries T-accounts. In addition to these daily transactions, we need to: 1. Adjust revenues and expenses in accordance with the Revenue Principle and Matching Principle Typically by adjusting balance sheet to account for all revenue that has been earned during the period and all expenses that have been incurred during the period 2. Then prepare the Income Statement, Balance Sheet, Statement of Retained Earnings, and Statement of Cash Flows. Don’t forget about the concept of accrual accounting Revenues are recognized when they are earned Expenses are recognized when they are incurred Not necessarily when cash is received or paid 1. Delivery has occurred 2. Persuasive evidence of an arrangement for payment 3. The price is fixed or determinable 4. Collection is reasonably assured Called the Revenue Principle Expenses are recognized in the same period as the revenues they support – “Matching Principle” Adjustments and Financial Statements
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Page 3 4 types of Adjustments at the end of the period 1. Unearned Revenues (aka Deferred Revenues) a. Cash is received BEFORE revenue is earned b. Example account – Unearned Revenue c. The adjusting entry at the end of the period records the revenue earned. d.
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This note was uploaded on 12/17/2010 for the course ACC 311 taught by Professor Charrier during the Fall '08 term at University of Texas at Austin.

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Class 9_14 & 15_10 - Ch 4 - Agenda Questions? Close out...

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