ch04-AFM101w2012

ch04-AFM101w2012 - Financial Accounting 4-1 PowerPoint...

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Unformatted text preview: Financial Accounting 4-1 PowerPoint Author: Robert G. Ducharme, MAcc, CA University of Waterloo, School of Accounting and Finance FINANCIAL ACCOUNTING Fourth Canadian Edition LIBBY, LIBBY, SHORT, KANAAN, GOWING Adjustments, Financial Statements, and the Quality of Earnings Chapter 4 4-2 Financial Accounting End of the Accounting Period Start of the Accounting Period Phase 1: During the Accounting Period (external transactions) ● Prepare a trial balance. ● Analyze the account balances. ● Record and post adjusting entries. ● Prepare financial statements. ● Record and post closing entries. ● Prepare a trial balance. ● Analyze the account balances. ● Record and post adjusting entries. ● Prepare financial statements. ● Record and post closing entries. Phase 2: End of the Accounting Period (internal transactions) ● Perform transaction analysis. ● Record journal entries. ● Post amounts to general ledger. ● Perform transaction analysis. ● Record journal entries. ● Post amounts to general ledger. Accounting Cycle LO 1 4-3 Financial Accounting End of Accounting Period Start of Accounting Period External Transactions Adjusting Entries Adjusting Entries At the end of the accounting period, the account balances are analyzed and adjusting journal entries are recorded for internal transactions that have a direct and measurable effect on the accounting entity, particularly for revenue and expense recognition. During the accounting period, external transactions between the business and other external parties are recorded as they occur. Accounting Cycle LO 1 4-4 Financial Accounting Purpose of Adjustments Revenues are recorded when earned. Revenues are recorded when earned. Expenses are recorded when incurred. Expenses are recorded when incurred. Because transactions occur over time, ADJUSTMENTS are required at the end of each fiscal period to get the revenues and expenses into the “right” period. Because transactions occur over time, ADJUSTMENTS are required at the end of each fiscal period to get the revenues and expenses into the “right” period. Matching Process Matching Process LO 1 4-5 Financial Accounting Types of Adjustments LO 1 4-6 Financial Accounting Adjusting Entries There are two types of adjusting entries. ACCRUALS ACCRUALS Revenues earned or expenses incurred that have not been previously recorded. Revenues earned or expenses incurred that have not been previously recorded. DEFERRALS DEFERRALS Receipts of assets or payments of cash in advance of revenue or expense recognition. Receipts of assets or payments of cash in advance of revenue or expense recognition. LO 2 4-7 Financial Accounting Unadjusted Trial Balance A listing of individual accounts, A listing of individual accounts, usually in financial statement order usually in financial statement order (A, L, SE, R, E) (A, L, SE, R, E) ....
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This note was uploaded on 04/02/2012 for the course AFM 101 taught by Professor Kennedy during the Winter '08 term at Waterloo.

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ch04-AFM101w2012 - Financial Accounting 4-1 PowerPoint...

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