Lecture05 2013.09.16 PostClass

Lecture05 2013.09.16 PostClass - Lecture5 IncomeStatement...

Info icon This preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Lecture 5 Income Statement Concepts Adjusting Entries
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Announcements Recitations this week will cover: (i) P4-31, P4-34, P4-43 (ii) P5-32, P5-44, P5-46, P5-47 Conflicts for Exam 1 send us email! Simpsons Corp Comprehensive Example Covers Lectures 1-5 Work thru it prior to next class! 2
Image of page 2
3 Goals of Today’s Class Discussion of adjusting entries Discuss depreciation as an adjusting entry Exercises
Image of page 3

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
In the news…deferrals 4 Navistar Cuts Revenue Outlook , TheStreet.com Truck builder Navistar , striving to rebound after spilling red ink amid the recession, cut its revenue outlook for fiscal 2012 even as it posted third- quarter results that surpassed Wall Street estimates… Navistar blamed the dimmed top-line guidance on deferred revenue from military customers, which the company expects to realize in 2013 instead of this year ... …Navistar now expects to post revenue of $12 billion for the fiscal year 2012, which ends Oct. 31. That's down from the company's earlier targeted range of $13.2 billion to $13.7 billion. .. …In pre-market trading Tuesday, Navistar shares were changing hands at $44.17, down 19 cents from the close in the previous session. The stock has gained about 15% year-to-date, but has mapped a downward trajectory since topping out at $58 in mid June. Deferred/Unearned Revenue: When is revenue “earned” ??? If you have a delay in delivery how does that affect revenue ???
Image of page 4
Passive Journal entries are also referred to as Adjusting Journal entries Passive journal entries are generated by an end-of-period adjustment required to update an account for a change due to passage of time End-of-period adjustments are most complex portion of record keeping Most prone to errors Auditors focus time on end-of-period adjustments Adjusting mid-period would be even more costly and complex 5 Adjusting Entries
Image of page 5

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
1. Identify type of adjustment e.g., unearned revenue and pre-paid expense accounts exist at end of period and need to be updated 2. Identify amount of adjustment e.g., how much of the unearned revenue should be recognize or pre-paid expense was used 3. Record the adjusting entry to the respective accounts 6 Adjusting Process
Image of page 6
7 Adjusting Entries There are two types of adjusting entries ACCRUALS Revenues earned or expenses incurred that have not been previously recorded DEFERRALS or payments of cash Receipts of assets or payments of cash in advance of revenue or expense recognition
Image of page 7

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Accruals Accruals occur when revenues have been earned or expenses incurred but no cash has been exchanged. Accruals occur when revenues have been earned or expenses incurred but no cash has been exchanged. End of accounting period. Cash received or paid. Revenues earned or expense incurred Examples include interest earned during the period (accrued revenue) or wages earned by employees but not yet paid (accrued expense)
Image of page 8
End of period Cash received or paid Revenues earned or expense incurred Examples include rent received in advance (an unearned revenue) or insurance paid in advance (a prepaid expense) Deferrals
Image of page 9

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern