Chapter 4 Psutka F11

Chapter 4 Psutka F11 - Chapter 4 The Adjustment Process...

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Unformatted text preview: Chapter 4 The Adjustment Process & Financial Statements Business Background Revenues are recorded when earned. Expenses are recorded when incurred. Because transactions occur over time, ADJUSTMENTS are required at the end of each fiscal period to get the revenues and expenses into the right period. Revenue /Matching Principles End of Accounting Period Start of Accounting Period External Transaction s Adjusting Entries The Accounting Cycle Time line Unadjusted Trial Balance After Year End Prepare F/S Prepare Closing Entries DUCHARME, INC. Unadjusted Trial Balance December 31, 2010 Description Debit Credit Cash 3,900 $ Accounts receivable 4,985 Inventory 3,300 Equipment 4,800 Accumulated amortization - equip. 1,440 $ Furniture and fixtures 6,600 Accumulated amortization - furn. & fix. 2,200 Accounts payable 2,985 Notes payable 4,000 Common shares 10,000 Retained earnings, 1/1/2010 1,760 Sales revenues 35,000 Cost of goods sold 27,500 Operating expenses 6,300 Totals 57,385 $ 57,385 $ TYPES OF ADJUSTING ENTRIES Deferrals (cash in advance) Converting assets to expenses Converting liabilities to revenues Accruals (cash after) Accruing unrecorded expenses Accruing unrecorded revenues End of accounting period. Cash received (revenue) or cash paid (expense) Revenues earned or expense incurred Deferred (Cash in advance) Revenues/Expenses End of accounting period....
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This note was uploaded on 10/27/2011 for the course AFM 101 taught by Professor Kennedy during the Fall '08 term at Waterloo.

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Chapter 4 Psutka F11 - Chapter 4 The Adjustment Process...

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