lec04 - Chapter4:Adjustments,Financial...

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Chapter 4: Adjustments, Financial Statements, and the Quality of Earnings
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Chapter 9 / Exercise C1
Fraud Examination
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Learning Objectives Understand the accounting cycleAnalyze the adjustments necessary at the end of the period to update balance sheet and income statement accountsPrepare four financial statementsExplain the closing process
Accounting Cycle
Unadjusted Trial BalanceA listing of individual accounts, usually in financial statement order.Ending debit or credit balances are listed in two separate columns.Total debit account balances should equal total credit account balances. 
Slide 5Partial Trial Balance
Slide 6Partial Trial Balance
Slide 7Purpose of AdjustmentsRevenues are recorded when earned.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.Matching Principle
Slide 8Types of Adjustments
Three steps to analyze the adjustments1.Determine whether there was revenue earned or an expense incurred that is not yet recorded?2.Determine whether the related cash was received or paid in the past or will it be received or paid in the future? 3.Compute the amount of revenue earned or expense incurred. 
Slide 10End of accounting period.Cash received.Revenues earned.Example includes rent received in advance (an unearned revenue).Unearned Revenues
Slide 11Unearned RevenuesPapa John’s received cash last period and recorded an increase in Cash and increase in Unearned Franchise Fees, a liability, to recognize the business’s obligation to provide future services to franchisees. During January, Papa John’s performed $1,100 in services for franchisees who had previously paid fees. 
Slide 12End of accounting period.Cash receivedRevenues earnedExample includes interest earned during the period (accrued revenue).Accrued Revenue
Slide 13Accrued RevenuesPapa John’s franchisees owe Papa John’s $830 in royalties for sales the franchisees made in the last week of January. The cash will be received in the future.
Slide 14Accrued RevenuePapa John’s loaned $3,000 to franchisees on December 31 (one month ago) at 6 percent interest per year with interest to be paid at the end of each year. There was also $8,000 in notes receivable outstanding all month from prior loans.  There are two components when lending or borrowing money:  principal (the amount loaned or borrowed) and interest (the cost of borrowing).  Notes Receivable (the principal) was recorded properly when the money was loaned. 
Slide 15

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Term
Spring
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N/A
Tags
Accounting, Revenue, Papa John
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The document you are viewing contains questions related to this textbook.
Fraud Examination
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Chapter 9 / Exercise C1
Fraud Examination
Albrecht/Albrecht
Expert Verified

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