RCJM02 - Copy - IncomeDetermination...

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Accrual Accounting and  Income Determination Revsine/Collins/Johnson/Mittelstaedt: Chapter 2
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22 Accounting Information System w Information Processing System n Manual Processing System n Computerized Data Processing System w Accounting Cycle w Accrual Accounting w Transaction Recording w Adjusting Journal Entry w Trial Balance
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33 Accounting DPS (Accounting Cycle-recording process) accounting transaction? Recording in journal Posting to ledger End of accounting period Y N Y 1/1 Cash $1,000 OE $1,000 Cash a/c OE a/c 1/1 $1,000 1/1 $1,000 Pre-adjustment Trial Balance Cash 100 Svc Rv 100 Cape $1,000 OE $1,000 1/1: Superman starts his service with cash $1,000. 1/3: Superman paid $1,000 for his high quality cape. 1/3 Cape $1,000 Cash $1,000 Cash a/c Cape a/c $1,000 1/3 $1,000 1/3 $1,000 12/31, Smallville pays $100 for Superman’s service. 12/31 Cash $100 Service rev $100 Service rev a/c $1,000 1/3 $1,000 12/31 $100 100
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44 Accounting Data Processing Procedure (Accounting Cycle-adjusting process) Any recording mistake Adjustment Done all Adjusting entries? Y N Y Trial Balance 12/31, Superman knows the cape can be used 100years. Depreciation $10 Accumulated depr. $10 Acc. Depr Depreciation 12/31 $10 12/31 $10 Post-adjustment Trial Balance Cash $100 Svc Rv 100 Cape $1,000 OE $1,000 depr. 10 Acc.depr 10
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55 Accounting Data Processing Procedure (Accounting Cycle-reporting process) Financial Statements I/S, SOE,B/S, CFS Close temporary accounts I/S (year x1) Service Rev $100 Depr. Exp 10 Net Income 90 SOE (year x1) Beginning OE $0 Investment 1,000 Net Income 90 Ending OE 1,090 B/S(12/31/x1) Cash 100 CC 1,000 Cape 990 RE 90 Assets 1090 Clams 1,090 CFS (year x1) OCF $100 Net income 90 Depr. Exp. 10 ICF (1,000) FCF 1,000 Change in cash 100 Svc rev 100 I/S 100 I/S 10 Depr 10 I/S 90 RE 90
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66 Accounting cycle-summary 1. Transaction analysis 2. Journal entry 3. Posting to ledger a/c 4. Pre adjustment Trial Balance 5. Adjusting journal entry 6. Posting 7. Post adjustment Trial Balance 8. Prepare financial statements 9. Close temporary accounts
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P2-2
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88 Accrual accounting: the cornerstone of income measurement Under accrual accounting w Revenues are “recognized” (realized or recorded) as soon as they are both: n Earned = the seller has performed a service or conveyed an asset to the buyer; n Measurable = the value to be received for that service or asset is reasonably assured and can be measured with a high degree of reliability.
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This note was uploaded on 09/21/2011 for the course ENGLISH 281 taught by Professor Williams during the Spring '11 term at San Diego State.

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RCJM02 - Copy - IncomeDetermination...

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