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ACTBAS1 - Lesson 9 AJEs - DLSUManila ACTBAS1 Lesson 9...

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DLSU - Manila ACTBAS1- Lesson 9 ADJUSTI NG ENTRI ES Augus t 1, 2012
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Learning Objectives Lecture Notes The Accrual Basis and the Adjusting Process The Accrual Basis and the Adjusting Process 1. The Accrual Basis 2. Nature of the Adjusting Process 3. Recording Adjusting Entries 4. Summary of Adjustment Process Lesson 9
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Reporting Revenue and Expense The Accrual Basis Trial Balance, Chart of Accounts Deferrals and Accruals Summary of Adjustments Slide # Lecture Note Topics 3 6 9 20 36 Lesson 9 The Accrual Basis and the Adjusting Process The Accrual Basis and the Adjusting Process
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TWO METHODS Reporting Revenue and Expense Reporting Revenue and Expense Cash Basis of Accounting Accrual Basis of Accounting
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Cash Basis of Accounting Cash Basis of Accounting Revenue reported when cash is received Expense reported when cash is paid Does not properly match revenues and expenses
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Accrual Basis of Accounting Accrual Basis of Accounting Revenue reported when earned Expense reported when incurred Properly matches revenues and expenses in determining net income Requires adjusting entries at end of period It just sounds mean – it really isn’t
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Cash basis Revenue Cash is received Expense Cash is paid Cash Basis Cash Basis
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Cash basis Accrual basis Revenue Cash is received Earned – service provided Expense Cash is paid Incurred – benefit received Cash and Cash and Accrual Basis Accrual Basis
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The Matching Concept The Matching Concept The Matching Concept The Matching Concept Assets Liabilities Owner’s Equity Debits = Credits Expenses Revenues
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The Matching Concept The Matching Concept The Matching Concept The Matching Concept Assets Liabilities Owner’s Equity Debits = Credits Expenses Revenues Net Profit
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The Matching Concept The Matching Concept The Matching Concept The Matching Concept Assets Liabilities Owner’s Equity Debits = Credits Net profit is determined by properly matching expenses and revenues. Expenses Revenues Net Profit matching
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NetSolutions Unadjusted Trial Balance December 31, 2010 11 Cash 2,065 2,065 12 12 Accounts Receivable Accounts Receivable 2,220 2,220 14 14 Supplies Supplies 2,000 2,000 15 15 Prepaid Insurance Prepaid Insurance 2,400 2,400 17 Land 20,000 20,000 18 18 Office Equipment Office Equipment 1,800 1,800 Assets Assets
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NetSolutions Unadjusted Trial Balance December 31, 2010 11 Cash 2,065 12 Accounts Receivable 2,220 14 Supplies 2,000 15 Prepaid Insurance 2,400 17 Land 20,000 18 Office Equipment 1,800 21 21 Accounts Payable Accounts Payable 900 900 23 23 Unearned Rent Unearned Rent 360 360 Liabilities Liabilities
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NetSolutions Unadjusted Trial Balance December 31, 2010 11 Cash 2,065 12 Accounts Receivable 2,220 14 Supplies 2,000 15 Prepaid Insurance 2,400 17 Land 20,000 18 Office Equipment 1,800 21 Accounts Payable 900 23 Unearned Rent 360 31 Chris Chee, Capital 25,000 32 Chris Chee, Drawing 4,000 4,000 Owner’s Equity Equity
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NetSolutions Unadjusted Trial Balance December 31, 2010 11 Cash 2,065 12 Accounts Receivable 2,220 14 Supplies 2,000 15 Prepaid Insurance 2,400 17 Land 20,000 18 Office Equipment 1,800 21 Accounts Payable 900 23 Unearned Rent 360 31 Chris Chee, Capital 25,000 32 Chris Chee, Drawing 4,000 41 41 Fees Earned Fees Earned 16,340 16,340 Revenue Revenue
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