KIC000072 - 30 on Oct 31, at the fate of $500 per month ~At...

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CHAPTER 4 Adjustments, Financial Statements, and the Quality of Financial Reporting Why Do We Need Adjusting Entries? )-Adjusting entries make the accounting records reflect the actual situation );;oTheyare necessary if cash changes hands at a different time that revenues are earned or expenses incurred »tt rhc cash proceeds the recognition of revenue or expense, have a deferral ~ If cash is after the recognition of revenue or expense, we witl have an accrual 2 I. Deferred Expense (Asset Expense) »Have a deferred expense when an asset is purchased and paid for that will last multiple periods. »Bxample: Paid $1,200 for an insurance policy on October 1,2006 that will last 12 months? »At the end of the period ask: '"How much asset and expense do I have? .. How much asset and expense should I have? .. How do I get to where I should be? Chap.' l:llo.p.J / ----,
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2. Deferred Revenue (Liability Revenue) » Have when receive cash in advance of earning revenue »Bxample: Tenant pays us 6 months rent for Nov I thru April
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Unformatted text preview: 30 on Oct 31, at the fate of $500 per month ~At Dec31 ask: .. How much revenue and liability do I have? .. How much revenue and liability should I have? ...... 2~ .. How do I get where I need to be? (]I IpA , 3. Accrued Expense (Expense & Liability) :> Happens when an expense is incurred before paid. }>Example: Weekly payroll for 5 day week is $1,000. Year ends on a Wednesday and employees are paid on Friday ~Ask: .. How much expense and liability do I have? How much expense and liability should I have? ,\O<rlU .. How dol get there? Cbop.' 5 4. Accrued Revenue (Asset & Revenue) Heppcns when revenue is earned before cash is received. ~ Example: Deoosued $100,000 in a C. D. on Dec I. 2006 that earns 6%. Interest is paid quarterly. s-Ask: .. How much asset and revenue do I have? .. How much asset and revenue should I have? 11 How do get there from here?...
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This note was uploaded on 09/01/2011 for the course ACCT 284 taught by Professor Clem during the Fall '08 term at Iowa State.

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KIC000072 - 30 on Oct 31, at the fate of $500 per month ~At...

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