CHAPTER 3 Summary - CHAPTER 3 ADJUSTING ACCOUNTS FOR...

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CHAPTER 3 ADJUSTING ACCOUNTS FOR FINANCIAL STATEMENTS ACCOUNTING CYCLE closing the books done at the end of an accounting period; this prepares accounts for the next accounting period Accounting cycle a sequence of activities to accumulate and report financial statements o Analyze o Record Analyze Record Journalize Post o Adjust o Report o Close Fiscal year the annual (one-year) accounting period adopted by a company Calendar year companies with fiscal year-ends on December 31 o 60% of companies are on calendar-year ANALYZING AND RECORDING TRANSACTIONS REVIEW OF ACCOUNTING PROCEDURES Chart of accounts lists the titles and numbers of all accounts found in its general ledger o Assets o Liabilities o Equity o Revenues o Expenses General journal book of original entry a tabular record where business activities are captured in debits and credits and recorded in chronological order before they are posted to the general ledger Journal where transactions are recorded o Each transaction must be stated in terms of equal debits and credits Posting after transactions are journalized, the debits and credits in each journal entry are transferred to their related general ledger accounts REVIEW OF RECORDING TRANSACTIONS Many transactions affect several accounting periods o Equipment is used for several years; note terms extend over two years; gift cards are not redeemed immediately
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ADJUSTING THE ACCOUNTS PREPARING AN UNADJUSTED TRIAL BALANCE Unadjusted trial balance a trial balance of all general ledgers accounts that currently carry a dollar balance; shows account balances before any adjustments are made o *purpose: to be sure the general ledger is in balance before management adjusts the accounts TYPES OF ADJUSTMENTS Adjusting entries journal entries made to reflect these four adjustments: o Deferred (unearned) revenues: allocate earned portion of unearned revenues to revenue to reflect revenues earned in the period o Deferred (prepaid) expenses allocate used or expired assets to expense to reflect expenses incurred in the period o Accrued revenues record revenues to reflect revenues earned in the period that are not yet received in cash or recorded o Accrued expenses record expenses to reflect expenses incurred in the period that are
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This note was uploaded on 08/16/2011 for the course ECON 300 taught by Professor Laren during the Spring '11 term at Missouri State University-Springfield.

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CHAPTER 3 Summary - CHAPTER 3 ADJUSTING ACCOUNTS FOR...

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