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Chapter 4 Psutka

Chapter 4 Psutka - Chapter4 FinancialStatements...

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Click to edit Master subtitle style  12/17/10 Chapter 4 The Adjustment Process &  Financial Statements
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 12/17/10 Business Background Revenues are  recorded when  earned. Expenses are  recorded when  incurred. Because transactions occur over time, ADJUSTMENTS are  required at the end of each fiscal period to get the revenues  and expenses into the “right” period. Revenue Recognition/Matching  Principles
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 12/17/10 End of Accounti ng Period Start of Accounti ng Period External Transaction s Adjusting Entries The Accounting Cycle – Time line  Unadjust ed Trial Balance After Year End Prepar e F/S Prepar e Closin g Entrie s
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 12/17/10 DUCHARME, INC. Unadjusted Trial Balance December 31, 2007 Description Debit Credit Cash 3,900 $ Accounts receivable 4,985 Inventory 3,300 Equipment 4,800 Accumulated amortization - equip. 1,440 $ Furniture and fixtures 6,600 Accumulated amortization - furn. & fix. 2,200 Accounts payable 2,985 Notes payable 4,000 Common shares 10,000 Retained earnings, 1/1/2007 1,760 Sales revenues 35,000 Cost of goods sold 27,500 Operating expenses 6,300 Totals 57,385 $ 57,385 $
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 12/17/10 TYPES OF ADJUSTING  ENTRIES Deferrals (cash in advance)
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