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Unformatted text preview: mounts from journal to ledger. Posting
Illustration 3-8 22 LO 4
LO 3. Trial Balance
3. Trial Balance
Illustration 3-19 Trial Balance – A list of each account and its balance; used to prove equality of debit and credit balances. 23 4. Adjusting Entries
4. Adjusting Entries
Revenues recorded in the period in which they are earned.
Expenses recognized in the period in which they are incurred.
Expenses recognized in the period in which they are incurred
Adjusting entries needed to ensure that the revenue recognition and matching principles are followed. 24 Types of Adjusting Entries
Types of Adjusting Entries
Illustration 3-20 Prepayments
1. Prepaid Expenses. Expenses paid in cash and recorded as assets before they are used or consumed. 3. Accrued Revenues. Revenues earned but not yet received in cash or recorded. 2. Unearned Revenues. Revenues received in cash and recorded as liabilities before they are earned. 25 Accruals 4. Accrued Expenses. Expenses incurred but not yet paid in cash or recorded. Adjusting Entries for Deferrals
Adjusting Entries for Deferrals
Deferrals are either prepaid
expenses or unearned
revenues. 26 Illustration 3-21 Adjusting Entries for “Prepaid Expenses”
Adjusting Entries for “Prepaid Expenses”
Payment of cash that is recorded as an asset because service or benefit will be received in the future.
Cash Payment BEFORE Expense Recorded Prepayments often occur in regard to:
advertising 27 rent
maintenance on equipment
fixed assets Adjusting Entries for “Unearned Revenues”
Adjusting Entries for “Unearned Revenues”
Receipt of cash that is recorded as a liability because the revenue has not been earned.
Cash Receipt Revenue Recorded BEFORE Unearned revenues often occur in regard to:
school tuition 28 magazine subscriptions
customer deposits Adjusting Entries for Accruals
Adjusting Entries for Accruals
Accruals are either accrued
revenues or accrued
expenses. 29 Illustration 3-27 Adjusting Entries for “Accrued...
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- Spring '14