LectureNoteswk5_209 - THE UNIVERSITY OF NEW SOUTH WALES...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: THE UNIVERSITY OF NEW SOUTH WALES Australian School of Business School of Accounting ACCT 1501: Accounting and Financial Management 1A Week 5 ADJUSTING AND CLOSING ENTRIES Student Handout Contents: 1. Introduction 2. Tutorial questions – Week 6 3. Lecture slides Lecturer: Andrew Jackson School of Accounting UNSW Course website: http://www.webct.unsw.edu.au/ 1. Introduction This week, we explore two concepts: adjusting entries and closing entries. Adjusting entries are the steps required to ensure accounts are “correct”. Some of our steps in the recording process result in the accounts being incorrect; this is mainly for reasons of convenience. For example, we don’t record a wages expense for every hour (or minute, or second, or millisecond, where will it end?) that is worked. Instead, in order to spend less time accounting and more time actually doing business, we tolerate some inaccuracies. However, once we get to the end of the accounting period, when we are about to prepare financial statements, accuracy starts to matter. We want to make sure that all assets, liabilities, revenues and expenses are recorded correctly. To make sure this happens, we have to adjust the accounts . The process of undertaking adjusting entries exists to correct for any inaccuracy we have allowed in the recording process. The basic deal with adjusting entries is simple. First ask the question: How did we record it? Then ask the question: How should it have been recorded? Then fix it. Closing entries have a simple purpose. Revenues and expenses (and dividends) are just changes in Retained Profits. The only reason we keep them separate from Retained Profits is to simplify financial statements preparation. Once we’ve done our financial statements, we can lump revenues, expenses and dividends back where they belong: into Retained Profits. This also has one other neat effect – these accounts will now be set back to zero, ready to start counting transactions in the new accounting period. Learning objectives Understand and perform end of period adjusting entries Understand the difference between deferral and accrual situations Understand and perform the closing process Understand when and why reversing entries are done Required Reading Trotman & Gibbons Chapter 4 Chapter 5 2. Tutorial Questions – Week 6 Preparation Questions T&G 4.13 T&G 4.18 T&G 5.4 T&G 5.8 T&G 5.12 Tutorial Questions T&G DQ5.1, 5.8, 5.8 T&G 4.17 T&G 5.14 1 Accounting and Financial Management 1A Week 5, Session 2, 2009 Adjusting and Closing Entries 1 Andrew Jackson Quad 3060 Entries Today’s lecture objectives: Understand and perform end of period adjusting entries Understand difference between 2 deferral and accrual situations Understand and perform the closing process Understand and perform reversing entries Accrual Accounting Corporations supply accrual accounting information in their financial statements Intent is to record the financial effects of...
View Full Document

This note was uploaded on 09/14/2011 for the course ACCT 1001 taught by Professor John during the Spring '11 term at Renmin University of China.

Page1 / 23

LectureNoteswk5_209 - THE UNIVERSITY OF NEW SOUTH WALES...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online