Chapter-3 - 1 ACCT 2001 Chapter 3 Wednesday February 7...

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1 ACCT 2001 Chapter 3 Wednesday, February 7 Friday, February 9 Monday, February 12 Friday, February 16 Accounting Cycle 1. Business Transaction Takes Place 2. Make a General Journal Entry 3. Post the Journal Entry to the Ledgers 4. At End of Period, List everything on the Unadjusted Trial Balance 5. Adjustments 6. Record Adjusting Entries to the General Journal 7. Post Adjusting Entries to the Ledgers 8. Adjusting Entries to the Trial Balance 9. Income Statement (Pg. 125, 129) 10. Statement of Retained Earnings 11. Balance Sheet 12. Statement of Cash Flow Methods of Accounting Cash Basis -When we receive cash, we record our revenue -Accounts Receivable does not exist -When we pay cash, we record an expense -Accounts Payable does not exist -No Adjustments -Does not abide by GAAP -Cannot trade stock if you use cash basis of acct. Accrual Accounting -Follows GAAP -What we will be talking about in this class Adjusting Entries -No business transaction triggers adjusting entries -It is done because GAAP tells us to -3 types: 1. Deferrals 2. Accruals 3. Deprecation
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2 Deferrals -Deferral means that we are going to delay something -They are used when one side pre-pays for a service Example A: What happens when we receive cash in advance? -According to the Revenue Principal , we do not record revenue until it is earned. So, until the company provides the service and the customer pays the full amount due, we do not record revenue.
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