Unit 2 IP - Unit 2 Individual Project Tammi Pierce American...

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Unit 2 Individual Project Tammi Pierce American InterContinental University
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Abstract This essay is based upon a scenario where the author is an accountant in a medium-sized manufacturing company. The author has been asked to mentor an accounting clerk who is new to the particular accounting department. The author will explain to the new employee why adjusting entries are necessary. She will describe the 4 types of adjusting entries, and provide a manufacturing industry example of each. The new employee will learn how these entries would be recorded in a computerized accounting system. Finally, the author will describe 1 ethical issue that could result from the preparation of these manufacturing entries. After reading this essay you will understand and be able to explain the Accounting Equation and its components (of assets, liabilities & capital).
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Unit 2 Individual Project I am an accountant in a medium-sized manufacturing company. I have been asked to mentor an accounting clerk who is new to your accounting department. I introduce myself to the new employee. We begin to engage in small conversation as I give her a tour of the office she will be working at. I walk her to her desk and begin to explain why adjusting entries are necessary. Before end-of-period financial reports are prepared, adjustments to prepaid and accrued accounts are made. This process helps provide a true indication of where the company stands financially and it matches income and expenses to the period they effect. There are several types of accounts that require adjustments: (Adjustments, 2010). Prepaid Expenses - items or services that are paid for up-front. They are classified as assets when purchased. When an expense is prepaid (for example - prepayment of a 6-month insurance policy for $1,200) an asset is created. Think of it this way; the company is due something of value - the insurance coverage for a 6-month period in the future. To simply expense the $1,200 at the time cash is spent would inaccurately allocate the full amount to that period. Instead, accountants create a Prepaid Insurance account and subtract from it, each
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This note was uploaded on 01/01/2012 for the course ACCT 205 taught by Professor Wendyw.achilles during the Spring '10 term at American InterContinental University.

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Unit 2 IP - Unit 2 Individual Project Tammi Pierce American...

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