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Chapter 4 - Chapter 4 Adjustments Financial Statements and...

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Chapter 4: Adjustments, Financial Statements, and Quality Of Earnings Cut-off errors : end-of-period transactions recorded in wrong period High quality financial information is relevant and reliable Adjustments: update records Conservative : do not overstate assets and revenues or understate liabilities and expenses; results in higher quality financial information ADJUSTING REVENUES AND EXPENSES Accounting Cycle Process to analyze and record transactions, adjust records at end of period, prepare financial statements, prepare records for next cycle Unadjusted Trial Balance Trial balance : list of all accounts with balances to provide check on equality of debits and credits Contra account : account that is an offset to (reduction of) the primary account; is directly related to another account but has opposite balance Net book value (book value, carrying value) : difference between acquisition cost and accumulated depreciation (the contra-account) Analysis Of Adjusting Entries
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