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Chapter+4+Slides+with+notes

Chapter+4+Slides+with+notes - Chapter 4 Adjustments...

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Chapter 4 Adjustments, Financial Statements, and the Quality of Earnings Slide 1 Chapter Four ACCT 2010 Fall 2011 Allen Huang Review Operating cycle NI = Revenues Expenses + Gains Losses NI = Revenues – Expenses + Gains – Losses Structure of income statements Cash basis accounting vs. accrual basis accounting Revenue recognition principle Slide 2 Chapter Four Matching principle Journal entries for recognizing revenues and expenses
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Direction of Transaction Effects For Assets: DR = Left = Increase; CR Right Decrease Slide 3 Chapter Four CR = Right = Decrease For Liab and SE: CR = Right = Increase; DR = Left = Decrease Assets + DR CR Normal Liabilities DR + CR Normal Shareholders’ Double-Entry Bookkeeping Balance Balance Equity DR + CR Normal Balance Retained Earnings DR + CR Normal Contributed Capital DR + CR Slide 4 Chapter Four Balance Normal Balance Revenues DR + CR Normal Balance Expenses + DR CR Normal Balance
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Learning Objectives for Ch 4 1. What is accounting cycle ? 2. The purpose of a trial balance. 3. Analyze the adjustments necessary at the end of the period to update balance sheet and income statement accounts. 4 Prepare fo r financial statements Slide 5 Chapter Four 4. Prepare four financial statements. 5. The closing process. Accounting Cycle During the period: O Analyze transactions. O Record journal entries. O Close revenues, gains, expenses, and l R i d O Post amounts to general ledger. O Prepare financial losses to Retained Earnings. Slide 6 Chapter Four At the end of the period: O Unadjusted trial balance O Adjust revenues and expenses. Prepare financial statements. O Disseminate statements to users.
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