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ch4_instructor_sp08 - ACG 2021 Accounting for Decisions...

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1 ACG 2021 Accounting for Decisions Chapter 4: Adjustments, Financial Statements, and Quality of Earnings Yunhao Chen [email protected]
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2 What do We Hope to Learn? Review of Accounting Cycle What are adjusting entries? Review of accruals and deferrals What is Trial Balance? 3 Trial Balances What is the closing process? How do we prepare Income Statement, Statement of Stockholders' Equity, and Balance Sheet?
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3 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. End of the period: End of the period: Adjust Adjust revenues and expenses and related balance sheet accounts. 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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4 The Accounting Cycle 1. Transactions are recorded with Journal Entries in a Journal . 2. Journals are posted to the General Ledger (“G/L”) or T- accounts 3. (First/) Unadjusted Trial Balance is prepared. 4. Adjusting Entries are made and posted 5. An Adjusted Trial Balance is prepared from the General Ledger 6. Financial statements are prepared from the Adjusted Trial Balance . 7. Closing journal entries are made and posted 8. A Post-closing Trial Balance is prepared
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5 Record Journal Entries As financial transaction occur, the effect is recorded in a journal Information recorded: Date of the transaction Accounts affected Dollar amounts of debits and credits (debit amounts always equal credit amounts) A brief explanation of the transaction
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6 How do Journal Entries Relate to T accounts ? Journal entries are recorded chronologically as transaction occur For example: Services are provided for $100 cash on January 15, 2002 Journal entries are written in a journal and then posted to the general ledger accounts (T- accounts) Jan 15 Cash 100 Service Revenue 10 An explanation goes here (e.g. To record service revenue)
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7 Posting Information is transferred from the individual journal entries to the separate pages in the general ledger (our T-accounts) After all journal entries are posted, it’s easy to calculate the balance of any accounts by summing the debits and credits Posting our example: Cash 100 Service Revenue 100
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8 Unadjusted Trial Balance Assets Liabilities Owners’ equity Revenues Expense   Total $100 20        $120 30 $50 40 $120 Debits Credits A trial balance is a list of all the accounts in the general ledger, with each account’s debit or credit balance
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ch4_instructor_sp08 - ACG 2021 Accounting for Decisions...

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