Ch4_sp11 - BCOR 2000 Chapter 4 Adjustments Financial Statements and the Quality of Earnings Game Plan Chapter 4 Adjustments Period Ends Generating

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BCOR 2000 – Chapter 4 Adjustments, Financial Statements, Adjustments, Financial Statements, and the Quality of Earnings and the Quality of Earnings
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Game Plan Chapter 4: Adjustments @ Period Ends Generating Financial Statements Closing ‘Temporary’ Accounts Chapter 5: Disclosure and Interpretation of Financial Statements
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The Accounting Cycle During the period: During the period: Analyze Analyze transactions. Record Record journal entries in the general journal. Post Post amounts to the general ledger. During the period: Analyze Analyze transactions. Record Record journal entries in the general journal. Post Post amounts to the general ledger. Prepare Prepare a complete set of financial statements. Disseminate Disseminate statements to users. Close Close revenues, gains, expenses and losses to retained earnings.
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Adjustment Process 1. Identify Type of Adjustment 2. Determine amount of adjustment 3. Record adjusting journal entry
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Types of Adjustments: A. Related to Deferrals (Income impact recognized after Cash Flow): 1. Revenue side – Unearned Revenue 2. Expense side – Prepaid Expenses, Inventory/Supplies, and Long-term assets B. Related to Accruals (Income impact recognized before Cash Flow) 1. Revenue side – Sales on Account (A/R), Interest Earned (Interest Rec.) 2. Expense side – Accrued Expenses (Wages Pay., Interest Pay., Income Taxes Payable, other)
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1 1 st st  Type - Unearned Revenue  Type - Unearned Revenue Amount of adjustment equals revenue earned during  period If not adjusted, liabilities overstated and revenues  understated Unearned Rev (L)                      Unadjusted                               Balance  Adjusting  Entry     Revenue                           Adjusting                                 Entry
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Ex: Unearned Revenue Received $1,200 on Oct. 2, for service contract extending for  a year (ending the following Sept. 30).  FYE = Dec. 31 Unearned Service  Revenue Cash Service Revenue  10/2     Cash                                                   1,200
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This note was uploaded on 10/29/2011 for the course BCOR 2000 taught by Professor Brush during the Spring '07 term at Colorado.

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Ch4_sp11 - BCOR 2000 Chapter 4 Adjustments Financial Statements and the Quality of Earnings Game Plan Chapter 4 Adjustments Period Ends Generating

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