Notes Ch 5

Notes Ch 5 - Jorge Rossello Busi 100 Chapter 5 Notes I. The...

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Jorge Rossello Busi 100 Chapter 5 Notes I. The Need For Adjusting Entries a. Adjusting entries: Changes in account balances recorded prior to making financial statements to update T-accounts because some amounts have increased or decreased gradually over time but were not recorded through a normal journal entry. b. Four general types of adjustments: i. Accrued expenses (accrued liabilities): Any expense that grows gradually over time but has not yet been paid. ii. Prepaid expenses iii. Accrued revenue iv. Unearned revenue (deferred revenue) II. Preparing Various Adjusting Entries a. Prepaid expenses: Assets that are created when an expense is paid in advance; normally recorded as an asset initially and then gradually reassigned to expense over time through adjusting entries. i. Example: Company pays rent for four months at $1000/month. A month has passed, and they must illustrate that asset becoming an expense: so debit rent expense and credit prepaid rent (asset) for $1000 each.
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This note was uploaded on 04/26/2011 for the course BUSI 100 taught by Professor Unknown during the Spring '07 term at UNC.

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Notes Ch 5 - Jorge Rossello Busi 100 Chapter 5 Notes I. The...

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