Test 2 (4-6) - Assets = liabilities + OE capital stock...

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Assets = liabilities + OE capital stock retained earnings expenses revenues dividends + - - + - + - + - + + - - + + - Accrual accounting - revenues are recognize when earned even when cash is not received. Expenses are recorded as incurred without regard for when they are paid. Periodic Reporting - Time period concept is periodic reporting, monthly, quarterly, annually Fiscal year = reporting period = calendar year Accrual Basis accounting 1. Revenue recognition principle 2. Matching principal v Cash Basis accounting – transactions are recorded an revenues and expenses are recognized only when cash is received or paid. Revenue recognition principle states that revenues are recorded when two main critieria have been met 1. When earning process is complete 2. When cash has been collected The matching principle – all costs and expenses incured in generating revenues must be recognized. Four Adjusting entries ( 1. always have one debit, one credit 2. one will end up on balance sheet, the other will end up on income 3. no cash involves in adjusting entries) 1. Unrecorded receivable (assets) 2. Unrecorded liabilities Debit asset credit revenue Debit expense credit liability 2. Prepaid expenses (assets) 4. Unearned revenue (liabilities) Debit expense Credit asset Debit liability (unearned Rev) Credit revenue Set up original entry with cash in it, then adjusting entry Unrecorded receivable When you work for someone but they will pay you in a later date, you still have to record them – adjusting entries You record them as account receivables, you debit account receivables, credit revenues. When cash comes in, you debit cash, credit
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This note was uploaded on 09/28/2011 for the course ACC 111 taught by Professor Caprio during the Summer '11 term at Mercer County Community College.

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Test 2 (4-6) - Assets = liabilities + OE capital stock...

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